[Congressional Bills 103th Congress]
[From the U.S. Government Publishing Office]
[S. 2351 Placed on Calendar Senate (PCS)]

                                                       Calendar No. 539

103d CONGRESS

  2d Session

                                S. 2351

                          [Report No. 103-323]

_______________________________________________________________________

                                 A BILL

To achieve universal health insurance coverage, and for other purposes.

_______________________________________________________________________

               August 2 (legislative day, July 20), 1994

                         Placed on the calendar





                                                       Calendar No. 539
103d CONGRESS
  2d Session
                                S. 2351

                          [Report No. 103-323]

To achieve universal health insurance coverage, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

               August 2 (legislative day, July 20), 1994

  Mr. Moynihan, from the Committee on Finance, reported the following 
     original bill; which was read twice and placed on the calendar

_______________________________________________________________________

                                 A BILL


 
To achieve universal health insurance coverage, 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; PURPOSE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Health Security 
Act''.
    (b) Universal Coverage as Purpose.--It is the purpose of this Act 
to achieve universal health insurance coverage through--
            (1) subsidies for the purchase of health insurance;
            (2) affordable standardized health insurance;
            (3) elimination of exclusionary practices by health 
        insurance companies;
            (4) a permanent National Health Commission which, beginning 
        in 1996, will make recommendations every two years to the 
        Congress on how to increase the number of people covered by 
        health insurance;
            (5) reduction of health costs through more open competitive 
        markets and continued advances in medical education and 
        research; and
            (6) health care provided under the medicare and medicaid 
        programs and health programs of the Department of Defense, 
        Department of Veterans Affairs, and Indian Health Service.
    (c) Table of Contents.--The table of contents of this Act is as 
follows:

Sec. 1. Short title; national goal; table of contents.
         TITLE I--HEALTH INSURANCE AND DELIVERY SYSTEMS REFORM

      Subtitle A--Federal Standards for State Regulatory Programs

Sec. 101. State plan for certification and regulation of health 
                            insurance and delivery systems.
         Subtitle B--Coordination With Other Provisions of Law

Sec. 111. McCarran-Ferguson reform.
Sec. 112. Office of Rural Health Policy.
Sec. 113. Amendments to the Employee Retirement Income Security Act of 
                            1974.
                           TITLE II--COVERAGE

Sec. 201. Coverage.
             TITLE III--PREMIUM AND COST-SHARING ASSISTANCE

Sec. 301. Premium and cost-sharing assistance.
          TITLE IV--ADMINISTRATIVE SIMPLIFICATION AND PRIVACY

Sec. 401. Administrative simplification.
Sec. 402. Privacy of health information.
                     TITLE V--MALPRACTICE AND FRAUD

                    Subtitle A--Federal Tort Reform

Sec. 501. Federal tort reform.
  Subtitle B--Expanded Efforts To Combat Health Care Fraud and Abuse 
                   Affecting Federal Outlay Programs

                      Part I--Improved Enforcement

Sec. 511. Health care fraud and abuse affecting Federal outlay 
                            programs.
Sec. 512. Definition of Federal health care offense.
Sec. 513. Use of funds by inspector general.
Sec. 514. Rewards for information leading to prosecution and 
                            conviction.
             Part II--Civil Penalties and Rights of Action

Sec. 521. Civil monetary penalties.
Sec. 522. Permitting parties to bring actions on own behalf.
Sec. 523. Exclusion from program participation.
                  Part III--Amendments to Criminal Law

Sec. 531. Health care fraud.
Sec. 532. Theft or embezzlement.
Sec. 533. False statements.
Sec. 534. Bribery and graft.
Sec. 535. Injunctive relief relating to health care offenses.
Sec. 536. Grand jury disclosure.
Sec. 537. Forfeitures for violations of fraud statutes.
             Part IV--Amendments to Civil False Claims Act

Sec. 541. Amendments to Civil False Claims Act.
                         Part V--Effective Date

Sec. 551. Effective date.
          TITLE VI--MEDICARE, MEDICAL EDUCATION, AND MEDICAID

Sec. 600. References to Social Security Act.
                          Subtitle A--Medicare

                   Part I--Risk Contracting Entities

Sec. 601. Individual election to remain in certain health plans.
Sec. 602. Improvements of risk contracts.
                 Part II--Provisions Related to Part A

Sec. 611. Inpatient hospital services update for PPS hospitals.
Sec. 612. Reduction in payments for capital-related costs for inpatient 
                            hospital services.
Sec. 613. Reductions in disproportionate share payments.
Sec. 614. Revised payment methodology for rehabilitation and long-term 
                            care hospitals.
Sec. 615. Moratorium on designation of new long-term hospitals.
Sec. 616. Extension of freeze on updates to routine service cost limits 
                            for skilled nursing facilities.
Sec. 617. Payments for sole community hospitals with teaching programs 
                            and multihospital campuses.
Sec. 618. Medicare-dependent, small rural hospitals.
Sec. 619. Provisions relating to rural health transition grant program.
Sec. 620. Limited service hospital program.
Sec. 621. Termination of indirect medical education payments.
Sec. 622. Subacute care study.
                Part III--Provisions Relating to Part B

Sec. 631. Updates for physicians' services.
Sec. 632. Substitution of real GDP to adjust for volume and intensity; 
                            repeal of restriction on maximum reduction 
                            permitted in default update.
Sec. 633. Payment for physicians' services relating to inpatient stays 
                            in certain hospitals.
Sec. 634. Changes in underserved area bonus payments.
Sec. 635. Development and implementation of resource-based methodology 
                            for practice expenses.
Sec. 636. Demonstration projects for medicare State-based performance 
                            standard rate of increase.
Sec. 637. Elimination of formula-driven overpayments for certain 
                            outpatient hospital services.
Sec. 638. Eye or eye and ear hospitals.
Sec. 639. Imposition of coinsurance on laboratory services.
Sec. 640. Application of competitive acquisition process for part B 
                            items and services.
Sec. 641. Application of competitive acquisition procedures for 
                            laboratory services.
Sec. 642. Expanded coverage for physician assistants and nurse 
                            practitioners.
Sec. 643. General part B premium.
              Part IV--Provisions Related to Parts A and B

Sec. 651. Medicare secondary payer changes.
Sec. 652. Modification to physician referral exception.
Sec. 653. Expansion of centers of excellence.
Sec. 654. Medicare select.
Sec. 655. Medigap.
Sec. 656. Reduction in routine cost limits for home health services.
Sec. 657. Termination of graduate medical education payments.
Sec. 658. Extension of social health maintenance organization 
                            demonstrations.
Sec. 659. Study on medicare spending.
Sec. 660. Streamlined processing systems.
                     Subtitle B--Medical Education

Sec. 665. Medical education.
             Subtitle C--Home and Community-Based Services

Sec. 667. State programs for home and community-based services for 
                            individuals with disabilities.
                      Subtitle D--Medicaid Program

Part I--Integration of Certain Medicaid Eligibles Into Reformed Health 
                              Care System

Sec. 671. Limiting coverage under medicaid of items and services 
                            covered under standard benefit package.
   Part II--Coordinated Care Services for Disabled Medicaid Eligibles

Sec. 672. Coordinated care services for disabled medicaid eligibles.
     Part III--Payments to Hospitals Serving Vulnerable Populations

Sec. 673. Replacement of DSH payment provisions with provisions 
                            relating to payments to hospitals serving 
                            vulnerable populations.
              Part IV--Medicaid Long-term Care Provisions

Sec. 674. Payments for home or community-based care, personal care 
                            services, and frail elderly services.
Sec. 675. Increased resource disregard for individuals receiving 
                            certain services.
Sec. 676. Frail elderly demonstration project waivers.
Sec. 677. Elimination of requirement of prior institutionalization with 
                            respect to habilitation services furnished 
                            under a waiver for home or community-based 
                            services.
Sec. 678. Elimination of rule regarding availability of beds in certain 
                            institutions.
                         Part V--Miscellaneous

Sec. 679. Medicaid coverage of all certified nurse practitioner and 
                            clinical nurse specialist services.
                     TITLE VII--REVENUE PROVISIONS

Sec. 700. Amendment of 1986 Code.
                    Subtitle A--Financing Provisions

              Part I--Increase in Tax on Tobacco Products

Sec. 701. Increase in excise taxes on tobacco products.
Sec. 702. Modifications of certain tobacco tax provisions.
Sec. 703. Imposition of excise tax on manufacture or importation of 
                            roll-your-own tobacco.
                  Part II--Health Related Assessments

Sec. 705. Assessments on insured and self-insured health plans.
Sec. 706. Tax on high cost health plans.
          Part III--Recapture of Certain Health Care Subsidies

Sec. 711. Recapture of certain health care subsidies received by high-
                            income individuals.
                       Part IV--Other Provisions

Sec. 715. Increase in tax on certain hollow point and large caliber 
                            handgun ammunition.
Sec. 716. Modification to self-employment tax treatment of certain S 
                            corporation shareholders and partners.
Sec. 717. Extending medicare coverage of, and application of hospital 
                            insurance tax to, all State and local 
                            government employees.
       Subtitle B--Tax Treatment of Employer-Provided Health Care

Sec. 721. Tax treatment of voluntary employer health care 
                            contributions.
Sec. 722. Elimination of exclusion of health benefits provided through 
                            a flexible spending arrangement.
Sec. 723. 2-year extension of deduction for health insurance costs of 
                            self-employed individuals.
Sec. 724. Limitation on prepayment of medical insurance premiums.
 Subtitle C--Deduction for Individuals Purchasing Own Health Insurance

Sec. 731. Deduction for health insurance costs of individuals.
                    Subtitle D--Exempt Organizations

                   Part I--Health Care Organizations

Sec. 741. Qualification and disclosure requirements for nonprofit 
                            health care organizations.
Sec. 742. Excise taxes for private inurement by tax-exempt health care 
                            organizations.
Sec. 743. Treatment of health maintenance organizations, parent 
                            organizations, and health insurance 
                            purchasing cooperatives.
Sec. 744. Tax treatment of taxable organizations providing health 
                            insurance and other prepaid health care 
                            services.
Sec. 745. Organizations subject to section 833.
Sec. 746. Tax exemption for high-risk insurance pools.
           Part II--Tax Treatment of Section 501(c)(3) Bonds

Sec. 748. Tax treatment of 501(c)(3) bonds similar to governmental 
                            bonds.
   Subtitle E--Tax Treatment of Long-Term Care Insurance and Services

Sec. 751. Qualified long-term care services treated as medical care.
Sec. 752. Treatment of long-term care insurance.
Sec. 753. Tax treatment of accelerated death benefits under life 
                            insurance contracts.
Sec. 754. Tax treatment of companies issuing qualified accelerated 
                            death benefit riders.
                  Subtitle F--Health Care Trust Funds

Sec. 761. Establishment of health care trust funds.
                  Subtitle G--Other Revenue Provisions

                  Part I--Employment Status Provisions

Sec. 771. Employment status proposal required from Department of the 
                            Treasury.
Sec. 772. Increase in services reporting penalties.
         Part II--Tax Incentives for Health Services Providers

Sec. 775. Nonrefundable credit for certain primary health services 
                            providers.
Sec. 776. Expensing of medical equipment.
                   Part III--Miscellaneous Provisions

Sec. 781. Post-retirement medical and life insurance reserves.
Sec. 782. Coordination with health care continuation provisions.
Sec. 783. Credit for cost of personal assistance services required by 
                            employed individuals.
Sec. 784. Disclosure of return information for administration of 
                            certain programs under the Health Security 
                            Act.
Sec. 785. Special rule for deferred compensation plans of group medical 
                            practices.
               Subtitle H--Ensuring Health Care Financing

Sec. 791. Ensuring health care financing.

         TITLE I--HEALTH INSURANCE AND DELIVERY SYSTEMS REFORM

      Subtitle A--Federal Standards for State Regulatory Programs

SEC. 101. STATE PLAN FOR CERTIFICATION AND REGULATION OF HEALTH 
              INSURANCE AND DELIVERY SYSTEMS.

    (a) Medicaid State Plan Requirement.--Section 1902(a) of the Social 
Security Act (42 U.S.C. 1396a(a)) is amended by striking ``and'' at the 
end of paragraph (61), by striking the period at the end of paragraph 
(62) and inserting ``; and'', and by inserting after paragraph (62) the 
following new paragraph:
            ``(63) provide that the State is a participating State 
        under title XXI.''
    (b) Participating State Plan for Certification and Regulation of 
Health Insurance and Delivery Systems.--The Social Security Act is 
amended by adding at the end the following new title:

  ``TITLE XXI--STATE PLAN FOR CERTIFICATION AND REGULATION OF HEALTH 
                     INSURANCE AND DELIVERY SYSTEMS

                          ``table of contents
               ``Subtitle A--Participating State Program

                   ```subpart a--access to coveragees
``Sec. 21001. Establishment of participating State programs.
``Sec. 21002. Access to standardized health care coverage.
``Sec. 21003. Other State program responsibilities.
``subpart b--accreditation, certification, enforcement, and information
``Sec. 21011. Accreditation and certification of health plans and long-
                            term care policies.
``Sec. 21012. Certification enforcement.
``Sec. 21013. C``subpart c--other state responsibilities
``Sec. 21021. Establishment of community rating areas.
``Sec. 21022. Designation of health plan service areas.
``Sec. 21023. Reinsurance and risk adjustment program.
``Sec. 21024. Specification of annual general enrollment period.
``Sec. 21025. Premium approval process for long-term care policies.
``Sec. 21026. Requirements relating to possessions of the United 
                            States.
         ``Part II--Requirements for State Single-payer Systems

``Sec. 21031. Single-payer system described.
``Sec. 21032. General requirements for single-payer systems.
``Sec. 21033. Special rules for States operating Statewide single-payer 
                            system.
``Sec. 21034. Special rules for community rating area-specific single-
                            payer systems.
              ``Part III--Treatment of Certain State Laws

``Sec. 21041. Preemption of State law restrictions on network plans.
``Sec. 21042. State law restrictions on health professional licensure.
``Sec. 21043. Preemption from State benefit mandates.
``Sec. 21044. Preemption of State law regulating utilization management 
                            and review.
                  ``Part IV--Federal Responsibilities

``Sec. 21051. Federal role with respect to multistate health plans.
``Sec. 21052. Establishment of residency rules.
``Sec. 21053. Workplace wellness program.
``Sec. 21054. Employee leasing rules.
``Sec. 21055. Approval of private accreditation programs.
                    ``Part V--Definitions and Rules

``Sec. 21100. Definitions and rules of general application.
                   ``Subtitle B--Standards for Reform

          ``Part I--Establishment and Application of Standards

``Sec. 21101. Certified standard health plans.
``Sec. 21102. Certified supplemental health benefits plans.
``Sec. 21103. Certified long-term care policies.
``Sec. 21104. General rules.
        ``Part II--S``subpart a--insurance standardsHealth Plans
``Sec. 21111. Guaranteed issue and renewal.
``Sec. 21112. Enrollment.
``Sec. 21113. Rating limitations for community-rated market.
``Sec. 21114. Rating practices and payment of premiums.
``Sec. 21115. Nondiscrimination based on health status.
``Sec. 21116. Ben``subpart b--delivery system standards
``Sec. 21121. Reinsurance and risk adjustment.
``Sec. 21122. Capital requirements.
``Sec. 21123. Collection and provision of standardized information.
``Sec. 21124. Quality improvement and assurance.
``Sec. 21125. Patient protections and provider selection.
``Sec. 21126. Alternative dispute resolution procedures relating to 
                            malpractice claims.
``Sec. 21127. Access to essential community providers.
``Sec. 21128. Health plan service area capacity.
``Sec. 21129. Access to specialized services.
``Sec. 21130. Participating physician program.
``Sec. 21131. Out-of-area coverage.
 ``Part III--Standards Applicable to Supplemental Health Benefits Plans

``Sec. 21141. Imposition of requirements on supplemental health 
                            benefits plans.
``Sec. 21142. Standards for supplemental services plans.
``Sec. 21143. Standards for cost-sharing plans.
``Sec. 21144. Prohibition on offering of multiple packages to 
                            individual.
       ``Part IV--Standards Applicable to Long-term Care Policies

``Sec. 21151. Regulation of sales practices.
``Sec. 21152. Additional responsibilities for carriers.
``Sec. 21153. Renewal standards for issuance, and basis for 
                            cancellation of policies.
``Sec. 21154. Benefit standards.
``Sec. 21155. Nonforfeiture.
``Sec. 21156. Limit of period of contestability and right to return.
``Sec. 21157. Civil money penalty and private actions.
``Sec. 21158. Long-term care policy defined.
                ``Subtitle C--Benefits and Cost-Sharing

                  ``Part I--Standard Benefits Packages

``Sec. 21201. General description of standard benefits packages.
``Sec. 21202. Description of categories of items and services.
``Sec. 21203. Cost-sharing.
               ``Part II--National Health Benefits Board

``Sec. 21211. Creation of National Health Benefits Board; membership.
``Sec. 21212. Qualifications of Board members.
``Sec. 21213. General duties and responsibilities.
``Sec. 21214. Powers.
``Sec. 21215. Funding.
``Sec. 21216. Applicability of Federal Advisory Committee Act.
``Sec. 21217. Congressional consideration of Board recommendations.
   ``Part III--Provisions Relating to Abortion and Religious Beliefs

``Sec. 21221. Regulation of abortion by the States.
``Sec. 21222. No requirement to create or maintain abortion clinics and 
                            providers.
``Sec. 21223. Provisions relating to religious belief or moral 
                            conviction.
             ``Subtitle D--Expanded Access to Health Plans

                   ``Part I--Access Through Employers

``Sec. 21401. General employer responsibilities.
``Sec. 21402. Maintenance of effort for coverage of children.
``Sec. 21403. Development of large employer purchasing groups.
``Sec. 21404. Enforcement.
   ``Part I``subpart a--functions of purchasing cooperativesperatives
``Sec. 21411. Enrollment of community-rated individuals in certified 
                            standard health plans.
``Sec. 21412. Duties of purchasing cooperatives.
``Sec. 21413. Agreements with certified standard health plans.
``Sec. 21414. Provision of information.
``S``subpart b--organization and operation of purchasing cooperatives
``Sec. 21417. Establishment.
``Sec. 21418. Board of directors.
``Sec. 21419. Prohibition against self-dealing and conflicts of 
                            interest.
``Sec. 21420. Coordination among purchasing cooperatives.
              ````subpart a--qualified association plansns
``Sec. 21431. Treatment of qualified association plans.
``Sec. 21432. Modifications of standards applicable to qualified 
                            association plans.
``Sec.``subpart b--special rule for church and multiemployer plans
``Sec. 21435. Special rule for church and multiemployer plans.
   ``Subtitle E--Implementation of Consumer Information Programs and 
                            Quality Research

``Sec. 21501. Consumer information programs.
``Sec. 21502. Health services and quality improvement research.
``Sec. 21503. Implementing quality improvement research.
``Sec. 21504. Annual reports.
     ``Subtitle F--Programs to Improve Access To Underserved Areas

``Part I--Grants for the Development and Operation of Community Health 
                   Groups and for Capital Assistance

``Sec. 21601. Designation of rural and urban underserved areas.
``Sec. 21602. Community health group; certified community health plan; 
                            community health network; eligible 
  ``subpart a--grants for the development and operation of community 
                             health groups
``Sec. 21611. Grants and contracts for development of plans and 
                            networks.
``Sec. 21612. Grants``subpart b--capital assistance plans and networks.
``Sec. 21613. Loans, loan guarantees, and grants for capital 
                            investment.
  ``Part II--Demonstration Projects to Promote Telemedicine and Other 
         Uses of the Telecommunications Network in Rural Areas

``Sec. 21621. Demonstration projects to promote telemedicine and other 
                            uses of the network.
``Sec. 21622. Federal interagency task force.
           ``Part III--Insufficient Amounts in the Trust Fund

``Sec.  21631. Insufficient amounts in the trust fund account.
            ``Subtitle G--Automobile Insurance Coordination

``Sec. 21701. Definitions.
    ``Part I--Requirements Relating to Automobile Insurance Medical 
                                Services

``Sec. 21711. Provision of automobile insurance medical services 
                            through health plans.
``Sec. 21712. Payment for automobile insurance medical services.
                       ``Part II--Administration

``Sec. 21721. Payment facilitation.
                 ``Subtitle H--Remedies and Enforcement

  ``Part I--Review of B``subpart a--general rulesEnrolled Individuals
``Sec. 21801. Health plan claims procedure.
``Sec. 21802. Review in area complaint review offices of grievances 
                            based on acts or practices by health plans.
``Sec. 21803. Initial proceedings in complaint review offices.
``Sec. 21804. Hearings before hearing officers in complaint review 
                            offices.
``Sec. 21805. Review by State Health Plan Review Board.
``Sec. 21806. Civ``subpart b--early resolution programs
``Sec. 21811. Establishment of Early Resolution Programs in complaint 
                            review offices.
``Sec. 21812. Initiation of participation in mediation proceedings.
``Sec. 21813. Mediation proceedings.
``Sec. 21814. Legal effect of participation in mediation proceedings.
``Sec. 21815. Enforcement ``subpart c--fundingents.
``Sec. 21816. Availability of trust fund amounts.
       ``Part II--Additional Remedies and Enforcement Provisions

``Sec. 21821. Civil enforcement.
``Sec. 21822. Facial constitutional challenges.
``Sec. 21823. Treatment of plans as parties in civil actions.
``Sec. 21824. General nonpreemption of rights and remedies.
``Sec. 21825. Nondiscrimination in federally assisted programs.

               ``Subtitle A--Participating State Program

                   ``PART I--GENERAL RESPONSIBILITIES

                    ``Subpart A--Access to Coverage

``SEC. 21001. ESTABLISHMENT OF PARTICIPATING STATE PROGRAMS.

    ``A State shall be a participating State for purposes of this title 
if such State establishes an accreditation, certification, enforcement, 
and information program (in this title referred to as a `State 
program') to carry out participating State responsibilities specified 
in this title.

``SEC. 21002. ACCESS TO STANDARDIZED HEALTH CARE COVERAGE.

    ``(a) Access to Standardized Coverage.--
            ``(1) In general.--A State program shall require that each 
        health plan (whether insured or self-insured) or long-term care 
        policy issued, sold, offered for sale, or operated in the State 
        shall be certified by the appropriate certifying authority as 
        one of the following:
                    ``(A) A certified standard health plan.
                    ``(B) A certified supplemental health benefits 
                plan.
                    ``(C) A certified long-term care policy.
                    ``(D) A certified nonstandard health plan.
            ``(2) Federal certification of multistate self-insured 
        plans.--For Federal certification of multistate self-insured 
        health plans, see section 21051.
            ``(3) Tax qualification.--For favorable Federal income tax 
        treatment which is available only to certified health plans, 
        see sections 213(f) and 4521 of the Internal Revenue Code of 
        1986.
    ``(b) Access to Affordable Coverage.--A State program shall require 
the following:
            ``(1) Community rating.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), all health plans shall be community-
                rated health plans which cover only community-rated 
                individuals.
                    ``(B) Experience-rated health plans.--Subparagraph 
                (A) shall not apply to any health plan which--
                            ``(i) is a self-insured health plan of an 
                        experience-rated employer, or
                            ``(ii) is an insured health plan which is 
                        experience-rated,
                but any such plan may cover only experience-rated 
                individuals.
                    ``(C) Restriction on self-insured health plans.--A 
                self-insured health plan may be established or 
                maintained only by an experience-rated employer.
            ``(2) Subsidized coverage.--Individuals shall be entitled 
        to such premium and cost-sharing assistance as is provided 
        under the program described in part B of title XIX.
    ``(c) Access Through Employers and Purchasing Cooperatives.--
            ``(1) Employers.--
                    ``(A) In general.--Subject to the requirements of 
                part I of subtitle D, a State program shall require 
                each employer--
                            ``(i) to make available to each employee of 
                        the employer the opportunity to enroll through 
                        the employer in one of at least three certified 
                        standard health plans which provide the 
                        standard benefits package established under 
                        subtitle C, including, if available, a fee-for-
                        service plan and a health plan with a point-of-
                        service option, and
                            ``(ii) to provide, upon request, payroll 
                        withholding of the employee's premiums.
                    ``(B) Special rules.--
                            ``(i) Purchasing cooperative.--An employer 
                        other than an experience-rated employer may 
                        meet the requirements of subparagraph (A)(i) 
                        through a purchasing cooperative.
                            ``(ii) Experience-rated employer.--An 
                        experience-rated employer shall meet the 
                        requirements of subparagraph (A)(i) only 
                        through offering self-insured or experience-
                        rated health plans.
            ``(2) Purchasing cooperatives.--A participating State shall 
        meet the requirements of part II of subtitle D with respect to 
        the establishment or sponsorship of purchasing cooperatives.
    ``(d) Access to Enrollment Options.--A State program shall require 
that all certified standard and nonstandard health plans and certified 
supplemental health benefits plans offer the classes of enrollment 
described in section 21113(b)(2)(B)(ii).

``SEC. 21003. OTHER STATE PROGRAM RESPONSIBILITIES.

    ``(a) Summary of Responsibilities.--The participating State 
responsibilities under this title include--
            ``(1) the accreditation and certification of standard 
        health plans and nonstandard health plans, including the 
        enforcement of the insurance and delivery system reform 
        standards for such plans under part II of subtitle B;
            ``(2) the accreditation and certification of supplemental 
        health benefits plans, including the enforcement of standards 
        for such plans under part III of subtitle B;
            ``(3) the accreditation and certification of long-term care 
        policies, including the enforcement of standards for such 
        policies under part IV of subtitle B;
            ``(4) providing for the collection and provision of 
        consumer information regarding health plans as specified under 
        section 21013;
            ``(5) the establishment of community rating areas under 
        section 21021 and State service areas under section 21022;
            ``(6) providing under section 21023 for--
                    ``(A) reinsurance pools,
                    ``(B) a risk adjustment program, and
                    ``(C) a cost-sharing adjustment program;
            ``(7) the specification of an annual general enrollment 
        period under section 21024;
            ``(8) providing for a premium approval process for long-
        term care policies under section 21025;
            ``(9) providing for the certification of workplace wellness 
        programs in accordance with rules established by the Secretary 
        under section 21053, including the receipt of employer self-
        certification forms, enforcement of compliance, and dispute 
        resolution;
            ``(10) enforcing employer responsibilities under part I of 
        subtitle D;
            ``(11) the oversight of purchasing cooperatives under part 
        II of subtitle D;
            ``(12) supporting the program quality assurances under 
        subtitle E;
            ``(13) supporting the development of community health 
        networks and plans to the extent required under subtitle F;
            ``(14) providing coordination between health plans and 
        automobile medical liability policies under subtitle G;
            ``(15) the development of program remedies and enforcement 
        described under subtitle H; and
            ``(16) conforming State laws and procedures to the rules 
        regarding fraud and medical malpractice under title XI.
    ``(b) Deadlines.--
            ``(1) In general.--Except as provided in paragraphs (2) and 
        (3), each participating State shall establish a State program 
        under this section by not later than January 1, 1996.
            ``(2) Supplemental insurance.--Each participating State 
        shall establish such State program with regard to supplemental 
        health benefits plans by not later than January 1, 1997.
            ``(3) Long-term care insurance.--Each participating State 
        shall establish such State program with regard to long-term 
        care policies by not later than April 1, 1997.
    ``(c) Secretarial Approval, Periodic Review, and Funding of State 
Programs.--
            ``(1) In general.--The Secretary--
                    ``(A) shall initially determine and approve the 
                compliance of State programs with the Federal 
                guidelines under this title; and
                    ``(B) shall periodically review such State programs 
                to determine if such programs continue to comply with 
                such guidelines.
            ``(2) Reporting requirements of states.--For purposes of 
        paragraph (1), each participating State shall submit to the 
        Secretary, at intervals established by the Secretary, a report 
        on the compliance of the State with the Federal guidelines 
        under this title.
            ``(3) Funding.--
                    ``(A) Availability of trust fund amounts.--There 
                shall be available to the Secretary, from the Health 
                Security Trust Fund established under section 9551 of 
                the Internal Revenue Code of 1986, $100,000,000 in 
                fiscal 1995 and $300,000,000 in each of the fiscal 
                years 1996 through 2004 to support participating States 
                that have submitted applications in accordance with 
                subparagraph (C) to develop State programs. The 
                Secretary shall develop a formula for determining the 
                appropriate awarding of funds to participating States 
                submitting such applications.
                    ``(B) Payments for independent review.--The 
                Secretary shall develop a supplemental payment schedule 
                for participating States that establish independent 
                review committees to provide recommendations concerning 
                health plans that fail certification.
                    ``(C) Application.--For purposes of subparagraph 
                (A), an application is in accordance with this 
                subparagraph if the applicant submits the application 
                to the Secretary at such time, in such manner, and 
                containing such information and assurances as the 
                Secretary may reasonably require.

``SEC. 21004. GENERAL DEFINITIONS RELATING TO HEALTH PLANS.

    ``(a) Health Plan.--For purposes of this title--
            ``(1) In general.--The term `health plan' means any plan or 
        arrangement which provides, or pays the cost of, health 
        benefits. Such term does not include the following, or any 
        combination thereof:
                    ``(A) Coverage only for accidental death or 
                dismemberment.
                    ``(B) Coverage providing wages or payments in lieu 
                of wages for any period during which the employee is 
                absent from work on account of sickness or injury.
                    ``(C) A medicare supplemental policy (as defined in 
                section 1882(g)(1)).
                    ``(D) Coverage issued as a supplement to liability 
                insurance.
                    ``(E) Worker's compensation or similar insurance.
                    ``(F) Automobile medical-payment insurance.
                    ``(G) A long-term care policy, including a nursing 
                home fixed indemnity policy (unless the Secretary 
                determines that such a policy provides sufficiently 
                comprehensive coverage of a benefit so that it should 
                be treated as a health plan).
                    ``(H) An equivalent health care program.
                    ``(I) Such other plan or arrangement as the 
                Secretary determines is not a health plan.
        Such term includes any plan or arrangement not described in any 
        preceding subparagraph which provides for benefit payments, on 
        a periodic basis, for a specified disease or illness or period 
        of hospitalization without regard to the costs incurred or 
        services rendered during the period to which the payments 
        relate.
            ``(2) Insured health plan.--
                    ``(A) In general.--The term `insured health plan' 
                means any health plan which is a hospital or medical 
                service policy or certificate, hospital or medical 
                service plan contract, or health maintenance 
                organization group contract offered by an insurer.
                    ``(B) Insurer.--The term `insurer' means--
                            ``(i) a licensed insurance company,
                            ``(ii) a prepaid hospital or medical 
                        service plan,
                            ``(iii) a health maintenance organization, 
                        or
                            ``(iv) any other similar entity,
                which is engaged in the business of providing a plan of 
                health insurance or health benefits or services.
            ``(3) Self-insured health plan.--The term `self-insured 
        health plan' means an employee welfare benefit plan, church 
        plan, government plan, or other arrangement which--
                    ``(A) provides health benefits funded in a manner 
                other than through the purchase of one or more insured 
                health plans, but
                    ``(B) does not include any coverage or insurance 
                described in subparagraphs (A) through (I) of paragraph 
                (1).
    ``(b) Standard Health Plan.--For purposes of this title, the term 
`standard health plan' means a health plan which provides for the 
standard benefits package or the alternative standard benefits package 
established under subtitle C.
    ``(c) Supplemental Health Benefits Plan.--For purposes of this 
title, the term `supplemental health benefits plan' means an insured or 
self-insured health plan which provides health benefits which consist 
of supplemental services or cost-sharing described in part IV of 
subtitle B. Such term does not include a plan which provides for 
benefit payments, on a periodic basis, for a specified disease or 
illness or period of hospitalization without regard to the costs 
incurred or services rendered during the period to which the payments 
relate.
    ``(d) Long-Term Care Policy.--For purposes of this title, the term 
`long-term care policy' has the meaning given such term by section 
21158.
    ``(e) Terms and Rules Relating to Community and Experience 
Rating.--For purposes of this title--
            ``(1) Community-rated health plan.--The term `community-
        rated health plan' means a health plan which meets the 
        requirements of section 21113.
            ``(2) Community-rated individual.--The term `community-
        rated individual' means an individual--
                    ``(A) who is not an experience-rated individual, or
                    ``(B) who is an experience-rated individual 
                (determined without regard to this subparagraph) who is 
                not a full-time employee of an experience-rated 
                employer and who does not enroll in a certified 
                standard health plan offered by the employer.
            ``(3) Experience-rated individual.--The term `experience-
        rated individual' means an individual who is an employee of an 
        experience-rated employer.
            ``(4) Experience-rated employer.--
                    ``(A) In general.--The term `experience-rated 
                employer' means, with respect to any calendar year, any 
                employer if, on each of 20 days during the preceding 
                calendar year (each day being in a different week), 
                such employer (or any predecessor) employed 100 or more 
                full-time employees for some portion of the day.
                    ``(B) Special rule for leasing businesses.--In the 
                case of an employer the primary trade or business of 
                which is employee leasing--
                            ``(i) all of the employees which such 
                        employer leases to other employers shall be 
                        treated as community-rated individuals unless 
                        treated as employees of an experience-rated 
                        employer other than the leasing trade or 
                        business, and
                            ``(ii) this title shall be applied 
                        separately with respect to its other employees.
            ``(5) Full-time employee.--The term `full-time employee' 
        means, with respect to any month, an employee who normally 
        performs at least 24 hours of service per week for an employer 
        in the month (not including the month which includes the hiring 
        date of such employee).
            ``(6) Special rule for spouses and dependents.--If any 
        individual is offered coverage under a health plan as the 
        spouse or a dependent of a primary enrollee of such plan, such 
        individual shall have the status of such enrollee unless such 
        individual is eligible to elect other coverage and so elects.

``Subpart B--Accreditation, Certification, Enforcement, and Information

``SEC. 21011. ACCREDITATION AND CERTIFICATION OF HEALTH PLANS AND LONG-
              TERM CARE POLICIES.

    ``(a) Certified Health Plans.--
            ``(1) In general.--Each State program shall provide for the 
        accreditation and certification of health plans as certified 
        standard health plans, certified nonstandard health plans, and 
        certified supplemental health benefits plans.
            ``(2) Certified standard health plan.--For purposes of this 
        title, the term `certified standard health plan' means a health 
        plan which--
                    ``(A) provides for the standard benefits package or 
                the alternative standard benefits package established 
                under subtitle C, and
                    ``(B) is certified by the appropriate certifying 
                authority as meeting the other applicable requirements 
                of this title.
        A standard health plan shall not fail to be treated as a 
        certified standard health plan if such plan offers a medicare-
        eligible benefits package to medicare beneficiaries under a 
        medicare risk contract entered into with the Secretary under 
        section 1876.
            ``(3) Certified nonstandard health plan.--For purposes of 
        this title, the term `certified nonstandard health plan' means 
        a health plan which--
                    ``(A) is certified by the appropriate certifying 
                authority as meeting the applicable requirements of 
                this title for a standard health plan, except that a 
                plan does not provide the benefits packages established 
                under subtitle C; and
                    ``(B) is not a certified supplemental health 
                benefits plan.
            ``(4) Certified supplemental health benefits plan.--For 
        purposes of this title, the term `certified supplemental health 
        benefits plan' means a health plan which is certified by the 
        appropriate certifying authority as meeting the applicable 
        requirements of part III of subtitle B.
    ``(b) Certified Long-Term Care Policies.--
            ``(1) In general.--Each State program shall provide for the 
        accreditation and certification of long-term care policies as 
        certified long-term care policies.
            ``(2) Certified long-term care policy.--For purposes of 
        this title, the term `certified long-term care policy' means a 
        long-term care policy which is certified by the applicable 
        certifying authority as meeting the applicable requirements of 
        part IV of subtitle B.
    ``(c) Use of Private Accreditation Entities.--A State program may 
provide for the use of private accreditation entities in carrying out 
all or part of the duties under subsection (a) or (b).
    ``(d) Certification Fees.--A State program may impose appropriate 
certification fees on health plans and long-term care policies seeking 
certification.

``SEC. 21012. CERTIFICATION ENFORCEMENT.

    ``(a) In General.--A State program shall provide for the monitoring 
and enforcement of the certification of health plans and long-term care 
policies.
    ``(b) Complaint Process.--
            ``(1) In general.--A State program shall provide for--
                    ``(A) procedures for individuals and entities to 
                file written, signed complaints with the appropriate 
                certifying authority respecting alleged violations of 
                the standards; and
                    ``(B) responding to and investigating such 
                complaints within 90 days.
            ``(2) Consumer access to compliance information.--
                    ``(A) In general.--A State program shall provide 
                for consumer access to complaints filed with the 
                appropriate certifying authority with respect to health 
                plans and long-term care policies.
                    ``(B) Confidentiality.--The access provided under 
                subparagraph (A) shall be limited to the extent 
                required to protect the confidentiality of individual 
                enrollees and policyholders.
    ``(c) Enforcement Response.--
            ``(1) In general.--In the case of any health plan or long-
        term care policy which fails, in whole or in part, to maintain 
        its certified status, the State program may provide for--
                    ``(A) the imposition of a corrective program;
                    ``(B) State operation of the plan or policy to 
                provide transitional access;
                    ``(C) the suspension of new enrollment of 
                individuals;
                    ``(D) the penalty-free withdrawal of enrollees or 
                policyholders from the plan or policy;
                    ``(E) other intermediate sanctions; and
                    ``(F) withdrawal of certification after the plan or 
                policy has been given a reasonable opportunity to make 
                corrections.
            ``(2) Enforcement through civil money penalties.--In the 
        case of any supplemental health benefits plan or long-term care 
        policy which fails, in whole or in part, to maintain its 
        certified status, the State program shall impose a civil money 
        penalty of not more than 50 percent of gross premiums received 
        for the sale of such plan or policy. The State program shall 
        include rules similar to the rules of section 1128A (other than 
        subsections (a) and (b)) which shall apply to civil money 
        penalties under this subsection in the same manner as such 
        provisions apply to a penalty or proceeding under section 
        1128A(a).

``SEC. 21013. CONSUMER INFORMATION PROGRAM.

    ``(a) Establishment of Program.--
            ``(1) In general.--Each State program shall establish and 
        operate a consumer information program to provide consumers in 
        the State with comparative value information on the performance 
        of all health plans in each community rating area in the State.
            ``(2) Functions described.--The consumer information 
        program established under paragraph (1) shall conduct annual 
        surveys described in subsection (b)(1), annually publish 
        comparative value information described in subsection (b)(2), 
        and perform the additional functions described in subsection 
        (b)(3).
    ``(b) Functions.--
            ``(1) Annual surveys.--The consumer information program 
        shall conduct annual surveys (in accordance with a national 
        standard survey design and sampling strategy to be determined 
        by the Secretary under subtitle E) of health care consumers in 
        the participating State concerning access to care, use of 
        health services, health outcomes, patient satisfaction, and 
        other quality measures of local interest that a State may 
        designate.
            ``(2) Publication of comparative value information.--
                    ``(A) In general.--The consumer information program 
                shall annually publish the following comparative value 
                information collected pursuant to section 21123 on all 
                health plans offered in the participating State, listed 
                by community rating area, in a standard format to be 
                determined by the Secretary:
                            ``(i) Descriptive data, including--
                                    ``(I) the certification status of 
                                the plan;
                                    ``(II) benefits offered under the 
                                plan;
                                    ``(III) premiums, cost-sharing, and 
                                administrative charges under the plan;
                                    ``(IV) risk and referral 
                                arrangements under the plan;
                                    ``(V) health care providers used 
                                under the plan;
                                    ``(VI) the enrollee complaint and 
                                appeals process used under the plan; 
                                and
                                    ``(VII) other appropriate 
                                information as determined by the 
                                Secretary.
                            ``(ii) Data regarding the national measures 
                        of quality performance developed under section 
                        21501(b) and adjusted for case-mix (as the 
                        Secretary determines appropriate).
                            ``(iii) Data from the annual surveys 
                        described in paragraph (1).
                            ``(iv) A subset of quality measures for 
                        each health care provider.
                    ``(B) Interstate comparative value information.--
                The participating State may join with one or more other 
                State programs to prepare comparative value information 
                for a geographic area approved by the Secretary that 
                includes adjoining portions of contiguous participating 
                States.
                    ``(C) Distribution of comparative value 
                information.--Comparative value information prepared by 
                the consumer information program shall be distributed 
                by the program in a manner that ensures access to such 
                information by health care consumers and that is in 
                accordance with standards established by the Secretary. 
                The program shall distribute the comparative value 
                information through various entities, including 
                employers.
            ``(3) Additional functions.--The consumer information 
        program shall--
                    ``(A) educate consumers about comparability of 
                health plan characteristics and quality;
                    ``(B) provide information and make referrals to 
                assist in health plan enrollment and receipt of 
                subsidies, including the availability and specific 
                eligibility schedules regarding pregnant women and 
                children;
                    ``(C) conduct outreach to underserved and at-risk 
                populations to educate such populations on consumer 
                responsibilities and rights to ensure full 
                participation of such populations in the health care 
                system; and
                    ``(D) receive and seek to resolve complaints, and 
                have appropriate access to relevant information to 
                resolve the complaints.
    ``(c) Use of Nonprofit Organizations.--A State program may operate 
the consumer information program through a contract with a nonprofit 
organization selected by the State in a competitive process.
    ``(d) Additional Requirements.--Each State program shall meet the 
requirements specified under subtitles B and C of title XI with respect 
to certified health plans.

               ``Subpart C--Other State Responsibilities

``SEC. 21021. ESTABLISHMENT OF COMMUNITY RATING AREAS.

    ``(a) Establishment.--Each participating State under the State 
program shall, by not later than January 1, 1996, provide for the 
inclusion of all areas of the State into 1 or more community rating 
areas. The program may revise the boundaries of such areas from time to 
time consistent with this section.
    ``(b) Multiple Areas.--With respect to a community rating area--
            ``(1) no metropolitan statistical area or primary 
        metropolitan statistical area in a State may be divided into 
        more than 1 community rating area in such State;
            ``(2) the number of individuals residing within a community 
        rating area may not be less than 250,000; and
            ``(3) no area incorporated into a community rating area may 
        be incorporated into another community rating area.
    ``(c) Boundaries.--In establishing boundaries for community rating 
areas, a participating State may not discriminate on the basis of, or 
otherwise take into account, disability, health status, or perceived 
need for health services of a particular population. Such restrictions 
shall not prohibit participating States from establishing such 
boundaries to ensure that underserved and vulnerable populations are 
better served.
    ``(d) Interstate Areas.--Two or more contiguous participating 
States may provide for the establishment of a community rating area 
that includes adjoining areas of the States so long as all areas of any 
metropolitan statistical area or primary metropolitan statistical area 
within such States are within the same community rating area.

``SEC. 21022. DESIGNATION OF HEALTH PLAN SERVICE AREAS.

    ``(a) State Service Areas.--Pursuant to guidelines developed under 
subsection (b), each participating State under the State program shall 
designate, by not later than January 1, 1996, health plan service areas 
for purposes of sections 21127 and 21128 and subtitle F.
    ``(b) Guidelines.--The Secretary shall establish guidelines for the 
designation of health plan service areas--
            ``(1) which prevent the isolation of low-income and 
        vulnerable populations by preventing the division of 
        governmental boundaries of counties, towns, or cities; and
            ``(2) which include adjacent designated urban or rural 
        underserved areas.

``SEC. 21023. REINSURANCE AND RISK ADJUSTMENT PROGRAM.

    ``Each State program under this part shall provide for--
            ``(1) a reinsurance pool for community-rated standard 
        health plans and a reinsurance pool for self-insured standard 
        health plans (other than multistate self-insured health plans) 
        by January 1, 1996;
            ``(2) a risk adjustment program for community-rated 
        standard health plans by January 1, 1997; and
            ``(3) a cost-sharing adjustment program for all standard 
        health plans, except multistate self-insured health plans, by 
        January 1, 1997,
which meet the standards developed by the Secretary under section 
21101(b)(2).

``SEC. 21024. SPECIFICATION OF ANNUAL GENERAL ENROLLMENT PERIOD.

    ``Each participating State under the State program shall specify 
for the State (or for each community rating area) an annual period, of 
not less than 30 days, during which individuals in the State (or area) 
may enroll in health plans or change the health plans in which the 
individual is enrolled.

``SEC. 21025. PREMIUM APPROVAL PROCESS FOR LONG-TERM CARE POLICIES.

    ``(a) In General.--Each State program shall provide for a process 
for approving or disapproving proposed premium increases or decreases 
with respect to long-term care policies.
    ``(b) Application.--
            ``(1) In general.--Except as provided in paragraph (2), 
        this section shall not apply to a group long-term care policy 
        issued to a group described in section 4(E)(1) of the NAIC Long 
        Term Care Insurance Model Act (effective January 1991), except 
        that such group policy shall, pursuant to guidelines developed 
        by the Secretary, in consultation with the NAIC, provide notice 
        to policyholders and certificate holders of any premium change 
        under such group policy.
            ``(2) Exception.--Paragraph (1) shall not apply to--
                    ``(A) group conversion policies;
                    ``(B) the group continuation feature of a group 
                policy if the carrier separately rates employee and 
                continuation coverages; and
                    ``(C) group policies where the function of the 
                employer is limited solely to collecting premiums 
                (through payroll deductions or dues checkoff) and 
                remitting such premiums to the carrier.
    ``(c) Construction.--Nothing in this section shall be construed as 
preventing the NAIC from promulgating standards, or a State from 
enacting and enforcing laws, with respect to premium rates or loss 
ratios for all, including group, long-term care policies.
    ``(d) Access to Other Information.--The State program shall provide 
for consumer access to actuarial memoranda, including financial 
information, provided under this section.

``SEC. 21026. REQUIREMENTS RELATING TO POSSESSIONS OF THE UNITED 
              STATES.

    ``(a) In General.--A possession of the United States shall be a 
participating State meeting the requirements of this title only if 
there is an agreement in effect between the United States and such 
possession pursuant to which--
            ``(1) the laws of such possession impose a part B premium 
        recapture assessment (as defined in subsection (b));
            ``(2) nothing in any provision of law, including the law of 
        such possession, permits such possession to reduce or remit in 
        any way, directly or indirectly, any liability to such 
        possession by reason of such assessment;
            ``(3) any amount received in the Treasury of such 
        possession by reason of such assessment shall be paid (at such 
        time and in such manner as the Secretary of the Treasury shall 
        prescribe) to the Federal Supplementary Medical Insurance Trust 
        Fund;
            ``(4) such assessment is coordinated with the assessment 
        imposed by section 59B of the Internal Revenue Code of 1986 
        such that, for any period, an individual would be required to 
        pay (in the aggregate) not more than the applicable amount for 
        such period; and
            ``(5) the possession complies with such other requirements 
        as may be prescribed by the Secretary and the Secretary of the 
        Treasury to carry out the purposes of this paragraph, including 
        requirements prescribing the information individuals to whom 
        such assessment may apply shall furnish to the Secretary and 
        the Secretary of the Treasury.
    ``(b) Qualified Part B Premium Recapture Assessment.--In subsection 
(a), the term `qualified medicare part B premium recapture assessment' 
means an assessment imposed and collected by such a possession that 
is--
            ``(1) equivalent to the assessment imposed under section 
        59B of the Internal Revenue Code of 1986; and
            ``(2) imposed on all individuals who are bona fide 
        residents of the possession, to the extent such individuals 
        have not paid the assessment imposed under such section 59B to 
        the United States by reason of subsection (d)(5) of such 
        section.

         ``PART II--REQUIREMENTS FOR STATE SINGLE-PAYER SYSTEMS

``SEC. 21031. SINGLE-PAYER SYSTEM DESCRIBED.

    ``The Secretary shall approve an application of a State to operate 
a single-payer system if the Secretary finds that the system--
            ``(1) meets the requirements of section 21032; and
            ``(2)(A) in the case of a system offered throughout a 
        State, meets the requirements for a Statewide single-payer 
        system under section 21033; or
            ``(B) in the case of a system offered in a single community 
        rating area of a State, meets the requirements for an area 
        specific single-payer system under section 21034.

``SEC. 21032. GENERAL REQUIREMENTS FOR SINGLE-PAYER SYSTEMS.

    ``Each single-payer system shall meet the following requirements:
            ``(1) Establishment by state.--The system is established 
        under State law, and State law provides for mechanisms to 
        enforce the requirements of the system.
            ``(2) Operation by state.--The system is operated by the 
        State or a designated agency of the State.
            ``(3) Enrollment of individuals.--
                    ``(A) Mandatory enrollment of all community-rated 
                individuals.--The system shall provide for the 
                enrollment of all community-rated individuals residing 
                in the State (or, in the case of an area-specific 
                single-payer system, in the community rating area) who 
                are not medicare-eligible individuals.
                    ``(B) Optional enrollment of medicare-eligible 
                individuals.--At the option of the State and if the 
                Secretary has approved an application submitted by the 
                State, the system may provide for the enrollment of 
                medicare-eligible individuals residing in the State 
                (or, in the case of an area-specific single-payer 
                system, in the community rating area).
                    ``(C) Optional enrollment of experience-rated 
                individuals.--
                            ``(i) In general.--Except as provided in 
                        clause (ii), at the option of the State, a 
                        single-payer system may provide for the 
                        enrollment of experience-rated individuals 
                        residing in the State (or,
                        in the case of an area-specific single-payer 
                        system, in the community rating area).
                            ``(ii) Participation by certain multistate 
                        plans.--The system shall not require 
                        participation by any experience-rated 
                        individual who is enrolled in a certified 
                        multistate self-insured standard health plan 
                        which is a multiemployer plan described in 
                        section 21435(c)(2), or which is sponsored by 
                        an experience-rated employer sponsor with at 
                        least 5,000 full-time employees.
            ``(4) Direct payment to providers.--
                    ``(A) In general.--With respect to providers who 
                furnish items and services included in the standard 
                benefits package established under subtitle C to 
                individuals enrolled in the system, the State shall 
                make payments directly, or through fiscal 
                intermediaries, to such providers and assume (subject 
                to subparagraph (B)) all financial risk associated with 
                making such payments.
                    ``(B) Capitated payments permitted.--Nothing in 
                subparagraph (A) shall be construed to prohibit 
                providers furnishing items and services under the 
                system from receiving payments on a capitated, at-risk 
                basis based on prospectively determined rates.
            ``(5) Provision of standard benefits package.--
                    ``(A) In general.--The system shall provide for 
                coverage of the standard benefits package established 
                under subtitle C, including the cost-sharing provided 
                under the package (subject to subparagraph (B)), to all 
                individuals enrolled in the system.
                    ``(B) Imposition of reduced cost-sharing.--The 
                system may decrease the cost-sharing otherwise provided 
                in the standard benefits package established under 
                subtitle C with respect to any individuals enrolled in 
                the system or any class of services included in the 
                package, so long as the system does not increase the 
                cost-sharing otherwise imposed with respect to any 
                other individuals or services.
            ``(6) Federal payments.--The system shall provide for 
        mechanisms to ensure, in a manner satisfactory to the 
        Secretary, that Federal payments to a single-payer State or 
        community rating area shall be limited to the payments that 
        would have been made in the absence of the implementation of 
        the single-payer system.
            ``(7) Increased coverage or improved cost containment.--The 
        system, when fully implemented, shall be expected by the State 
        to--
                    ``(A) reduce the number of residents of the State 
                (or, in the case of an area-specific single-payer 
                system, the community rating area) who are without 
                health insurance coverage (as defined in section 
                2202(b)(2)) by at least 10 percent, or
                    ``(B) decrease the rate of growth of per capita 
                health care spending in the State (or, in the case of 
                an area-specific single-payer system, the community 
                rating area),
        compared to baseline projections developed by the State on the 
        basis of the most recent data, including data provided by the 
        National Health Care Commission established under section 2201.
            ``(8) Requirements generally applicable to standard health 
        plans.--The system shall meet the requirements applicable to a 
        standard health plan, except that--
                    ``(A) the system does not have the authority 
                provided to standard health plans under section 
                21111(e) (relating to permissible limitations on the 
                enrollment of community-rated eligible individuals on 
                the basis of limits on the plan's capacity); and
                    ``(B) the system is not required to meet the 
                requirements of sections 21113 (relating to rating 
                limitations for community-rated market) and 21122 
                (relating to capital requirements).

``SEC. 21033. SPECIAL RULES FOR STATES OPERATING STATEWIDE SINGLE-PAYER 
              SYSTEM.

    ``(a) In General.--In the case of a State operating a Statewide 
single-payer system--
            ``(1) the State shall operate the system throughout the 
        State; and
            ``(2) except as provided in subsection (b), the State shall 
        meet the requirements for participating States under part I.
    ``(b) Exceptions to Certain Requirements for Participating 
States.--In the case of a State operating a Statewide single-payer 
system, the State is not required to meet the following requirements 
otherwise applicable to participating States under part I:
            ``(1) Establishment of community rating and service 
        areas.--The requirements of sections 21021 (relating to the 
        establishment of community rating areas) and 21022 (relating to 
        the designation of health plan service areas).
            ``(2) Other references inapplicable.--Any requirement which 
        the Secretary determines is not appropriate to apply to a State 
        single-payer system.
    ``(c) Single-Payer State Defined.--In this title, the term `single-
payer State' means a State with a Statewide single-payer system in 
effect that has been approved by the Secretary in accordance with this 
part.

``SEC. 21034. SPECIAL RULES FOR COMMUNITY RATING AREA-SPECIFIC SINGLE-
              PAYER SYSTEMS.

    ``(a) In General.--In the case of a State operating a community 
rating area specific single-payer system--
            ``(1) except as provided in subsection (b), the State shall 
        meet the requirements for participating States under part I; 
        and
            ``(2) the community rating area in which the system is 
        operated shall meet the requirements of subsection (c).
    ``(b) Other References Inapplicable.--Any requirement which the 
Secretary determines is not appropriate to apply to a community rating 
area specific single-payer system.
    ``(c) Requirements for Community Rating Area in Which System 
Operates.--A community rating area in which an area-specific single-
payer system is operated shall meet the requirements applicable to 
community rating areas under section 21021.

              ``PART III--TREATMENT OF CERTAIN STATE LAWS

``SEC. 21041. PREEMPTION OF STATE LAW RESTRICTIONS ON NETWORK PLANS.

    ``(a) Limitation on Restrictions on Network Plans.--Effective as of 
January 1, 1996--
            ``(1) a State may not prohibit or limit a network plan from 
        including incentives for enrollees to use the services of 
        participating providers;
            ``(2) a State may not prohibit or limit a network plan from 
        requiring enrollees to obtain care from participating 
        providers;
            ``(3) a State may not prohibit or limit a network plan from 
        requiring enrollees to obtain referrals for specialty 
        treatment;
            ``(4) a State may not prohibit or limit the establishment 
        of different payment rates for network and non-network 
        providers;
            ``(5) a State may not prohibit or limit a network plan from 
        limiting the number and types of participating providers;
            ``(6) a State may not prohibit or limit a network plan from 
        using single source suppliers for pharmacy services, medical 
        equipment, and other supplies and services; and
            ``(7) a State may not prohibit or limit the corporate 
        practice of medicine.
    ``(b) Definitions.--In this section:
            ``(1) Network plan.--The term `network plan' means a health 
        plan--
                    ``(A) which--
                            ``(i) limits coverage of covered items and 
                        services to those provided by participating 
                        providers, or
                            ``(ii) provides, with respect to such items 
                        and services provided by persons who are not 
                        participating providers, for cost-sharing which 
                        is greater than that permitted under the 
                        standard benefits package established under 
                        subtitle C for participating providers;
                    ``(B) which has a sufficient number and 
                distribution of participating providers to assure that 
                the standard benefits package--
                            ``(i) is available and accessible to each 
                        enrollee, within the area served by the plan, 
                        with reasonable promptness and in a manner 
                        which assures continuity, and
                            ``(ii) when medically necessary, is 
                        available and accessible twenty-four hours a 
                        day and seven days a week;
                    ``(C) which provides benefits for covered items and 
                services not furnished by participating providers if 
                the services are medically necessary and immediately 
                required because of an unforeseen illness, injury, or 
                condition; and
                    ``(D) which provides out-of-area coverage.
            ``(2) Participating provider.--The term `participating 
        provider' means an entity or individual which provides, sells, 
        or leases health care services under a contract with a network 
        plan, which contract does not permit--
                    ``(A) cost-sharing in excess of the cost-sharing 
                permitted under a standard benefits package established 
                under subtitle C; and
                    ``(B) any enrollee charges (for covered items or 
                services) in excess of such cost-sharing.

``SEC. 21042. STATE LAW RESTRICTIONS ON HEALTH PROFESSIONAL LICENSURE.

    ``(a) In General.--Except as otherwise provided in this section, 
nothing in this title shall be construed as limiting any State's 
authority to enact and enforce laws with respect to the licensure or 
certification of any class of health professional or the provision of 
any class of health professional services.
    ``(b) Scope of Practice.--Effective as of January 1, 1996, a State 
may not restrict through licensure or otherwise the practice of any 
class of health professionals beyond what is justified by the skills 
and training of such professionals.
    ``(c) Academic Degree.--Effective as of January 1, 1996, a State 
may not restrict the participation, reimbursement, or indemnification 
of a health professional solely on the basis of the academic degree of 
such professional if the professional is acting within the scope of the 
professional's license under applicable State law.

``SEC. 21043. PREEMPTION FROM STATE BENEFIT MANDATES.

    ``Effective as of January 1, 1996, no State shall establish or 
enforce any law or regulation that requires any standard health plan to 
cover items and services that are different from the items and services 
specified pursuant to subtitle C.

``SEC. 21044. PREEMPTION OF STATE LAW REGULATING UTILIZATION MANAGEMENT 
              AND REVIEW.

    ``Effective as of January 1, 1996, a State may not regulate 
utilization management and review programs of any health plan to the 
extent not provided by this title.

                  ``PART IV--FEDERAL RESPONSIBILITIES

``SEC. 21051. FEDERAL ROLE WITH RESPECT TO MULTISTATE SELF-INSURED 
              HEALTH PLANS.

    ``(a) In General.--In the case of a multistate self-insured health 
plan or a multistate self-insured supplemental health benefits plan, 
the Secretary of Labor shall carry out activities under this title in 
the same manner as a participating State program would carry out 
activities under part I with respect to a health plan subject to such 
part.
    ``(b) Determination of Multistate Status.--For purposes of this 
title, a self-insured health plan or a self-insured supplemental health 
benefits plan shall be considered a multistate health plan if 
established or maintained by an experience-rated employer which has a 
substantial number of employees enrolled in such plan in each of 2 or 
more States (as determined by the Secretary of Labor).
    ``(c) Applicability of ERISA Enforcement Mechanisms.--The 
provisions of sections 502 (relating to civil enforcement), 504 
(relating to investigative authority), and 506 (relating to criminal 
enforcement) of the Employee Retirement Income Security Act of 1974 
shall apply to enforcement by the Secretary of Labor of the applicable 
requirements for experience-rated employers described in subsection (b) 
in the same manner and to the same extent as such provisions apply to 
enforcement of title I of such Act.

``SEC. 21052. ESTABLISHMENT OF RESIDENCY RULES.

    ``The Secretary shall establish rules relating to identifying the 
State (and community rating area) in which individuals reside. Such 
rules shall be based on the principal residence of such an individual.

``SEC. 21053. WORKPLACE WELLNESS PROGRAM.

    ``(a) In General.--The Secretary shall develop certification 
criteria for workplace wellness programs.
    ``(b) Application of Section.--Any health plan may offer a uniform 
premium discount, not to exceed 10 percent, to employers maintaining 
certified workplace wellness programs.

``SEC. 21054. EMPLOYEE LEASING RULES.

    ``The Secretary of Labor shall promulgate such regulations as may 
be necessary to prevent the avoidance of any requirements of this title 
through the use of employee leasing businesses.

``SEC. 21055. APPROVAL OF PRIVATE ACCREDITATION PROGRAMS.

    ``The Secretary shall certify the private accreditation entities 
described under section 21011(c).

                    ``PART V--DEFINITIONS AND RULES

``SEC. 21100. DEFINITIONS AND RULES OF GENERAL APPLICATION.

    ``Except as otherwise specifically provided, in this title the 
following definitions and rules apply:
            ``(1) Appropriate certifying authority.--The term 
        `appropriate certifying authority' means--
                    ``(A) except as provided in subparagraph (B), in 
                the case of a standard or nonstandard health plan, a 
                supplemental health benefits plan, or a long-term care 
                policy, the State commissioner or superintendent of 
                insurance or other State authority in the participating 
                State; or
                    ``(B) in the case of a multistate self-insured 
                health plan or a multistate self-insured supplemental 
                health benefits plan, the Secretary of Labor.
            ``(2) Covered items and services.--The term `covered items 
        and services' means items and services included in benefit 
        packages established under subtitle C.
            ``(3) Delivery system.--The term `delivery system' with 
        respect to a health plan includes a fee-for-service, use of 
        preferred providers, staff or group model health maintenance 
        organizations, and such other arrangements as the Secretary may 
        recognize.
            ``(4) Dependent.--The term `dependent' means, with respect 
        to any individual, any person--
                    ``(A) who is a child (within the meaning of section 
                151(c)(3) of the Internal Revenue Code of 1986) of the 
                individual; and
                    ``(B) who is--
                            ``(i) under 25 years of age and unmarried, 
                        or
                            ``(ii) permanently and totally disabled 
                        (within the meaning of section 151(c)(5)(C) of 
                        such Code).
            ``(5) Employer, employee, employment, and wages defined.--
                    ``(A) In general.--Except as otherwise provided in 
                this subtitle--
                            ``(i) the terms `wages' and `employment' 
                        have the meanings given such terms under 
                        section 3121 of the Internal Revenue Code of 
                        1986,
                            ``(ii) the term `employee' has the meaning 
                        given such term under section 3121 of such 
                        Code, subject to the provisions of chapter 25 
                        of such Code, and
                            ``(iii) the term `employer' has the same 
                        meaning as the term ``employer'' as used in 
                        such section 3121.
                    ``(B) Exceptions.--For purposes of subparagraph 
                (A)--
                            ``(i) Employment.--
                                    ``(I) Employment included.--
                                Paragraphs (1), (2), (5), (7) (other 
                                than clauses (i) through (iv) of 
                                subparagraph (C) and clauses (i) 
                                through (v) of subparagraph (F)), (8), 
                                (9), (10), (11), (13), (15), (18), and 
                                (19) of section 3121(b) of the Internal 
                                Revenue Code of 1986 shall not apply.
                                    ``(II) Exclusion of inmates as 
                                employees.--Employment shall not 
                                include services performed in a penal 
                                institution by an inmate thereof or in 
                                a hospital or other health care 
                                institution by a patient thereof.
                                    ``(III) Exclusion of part-time 
                                domestic service.--Employment shall not 
                                include domestic service in a private 
                                home of the employer (within the 
                                meaning section 3121(a)(7)(B), 
                                determined without dollar limitation) 
                                by an individual who is not a full-time 
                                employee.
                                    ``(IV) Exclusion of seasonal or 
                                temporary.--Employment shall not 
                                include seasonal or temporary services 
                                performed for an employer for less than 
                                6 months in a calendar year.
                                    ``(V) Consideration of industry 
                                practice.--As provided under regulation 
                                by the Secretary of Labor, an employee 
                                shall be considered to be employed on a 
                                full-time basis by an employer (and to 
                                be a full-time employee of an employer) 
                                for a month (or for all months in a 12-
                                month period) if the employee is 
                                employed by that employer on a 
                                continuing basis that, taking into 
                                account the structure or nature of 
                                employment in the industry, represents 
                                full-time employment in that industry.
                            ``(ii) Wages.--
                                    ``(I) In general.--Paragraph (1) of 
                                section 3121(a) of the Internal Revenue 
                                Code of 1986 shall not apply.
                                    ``(II) Tips not included.--The term 
                                `wages' does not include cash tips.
                            ``(iii) Employees.--
                                    ``(I) Treatment of self-employed.--
                                The term `employee' includes a self-
                                employed individual.
                                    ``(II) Exclusion of certain foreign 
                                employment.--The term `employee' does 
                                not include an individual with respect 
                                to service, if the individual is not a 
                                citizen or resident of the United 
                                States and the service is performed 
                                outside the United States.
                    ``(C) Aggregation rules for employers.--For 
                purposes of this title--
                            ``(i) all employers treated as a single 
                        employer under subsection (a) or (b) of section 
                        52 of the Internal Revenue Code of 1986 shall 
                        be treated as a single employer, and
                            ``(ii) under regulations of the Secretary 
                        of the Treasury, all employees of organizations 
                        which are under common control with one or more 
                        organizations which are exempt from income tax 
                        under subtitle A of the Internal Revenue Code 
                        of 1986 shall be treated as employed by a 
                        single employer.
                The regulations prescribed under clause (ii) shall be 
                based on principles similar to the principles which 
                apply to taxable organizations under clause (i).
            ``(6) Equivalent health care program.--The term `equivalent 
        health care program' means--
                    ``(A) part A or part B of the medicare program 
                under title XVIII of the Social Security Act,
                    ``(B) the medicaid program under title XIX of the 
                Social Security Act,
                    ``(C) the health care program for active military 
                personnel under title 10, United States Code,
                    ``(D) the veterans health care program under 
                chapter 17 of title 38, United States Code,
                    ``(E) the Civilian Health and Medical Program of 
                the Uniformed Services (CHAMPUS), as defined in section 
                1073(4) of title 10, United States Code,
                    ``(F) the Indian health service program under the 
                Indian Health Care Improvement Act (25 U.S.C. 1601 et 
                seq.), and
                    ``(G) a State single-payer system approved by the 
                Secretary under section 21031.
            ``(7) Family.--The term `family' includes an individual, 
        the individual's spouse, and the individual's dependents (if 
        any), as defined in paragraph (4).
            ``(8) Health plan sponsor.--The term `health plan sponsor' 
        means, with respect to--
                    ``(A) an insured health plan, the insurer, and
                    ``(B) a self-insured health plan, the experience-
                rated employer sponsor.
            ``(9) Health professional.--The term `health professional' 
        means an individual who is legally authorized to provide 
        services in the State in which such services are provided.
            ``(10) Legally authorized.--The term `legally authorized' 
        means, with respect to a provider, authorization under 
        licensing or certification laws of a State.
            ``(11) NAIC.--The term `NAIC' means the National 
        Association of Insurance Commissioners.
            ``(12) Participating state.--The term `participating State' 
        means a State establishing a State program under this title.
            ``(13) Provider.--The term `provider' includes a health 
        professional.
            ``(14) Purchasing cooperative.--The term `purchasing 
        cooperative' means a health insurance purchasing cooperative 
        established under section 21411.
            ``(15) Secretary.--The term `Secretary' means the Secretary 
        of Health and Human Services or the Secretary's delegate.
            ``(16) State.--The term `State' means each of the several 
        States, the District of Columbia, the Commonwealth of Puerto 
        Rico, the United States Virgin Islands, Guam, American Samoa, 
        and the Commonwealth of the Northern Mariana Islands.

                   ``Subtitle B--Standards for Reform

          ``PART I--ESTABLISHMENT AND APPLICATION OF STANDARDS

``SEC. 21101. CERTIFIED STANDARD HEALTH PLANS.

    ``(a) In General.--A standard health plan shall meet the applicable 
reform standards established under subsection (b).
    ``(b) Reform Standards.--
            ``(1) Establishment of general standards.--
                    ``(A) In general.--Except as provided in this 
                paragraph and paragraphs (2), (3), and (4), the 
                Secretary, in consultation with the National Health 
                Plan Standards and Quality Advisory Committee, shall 
                develop and publish specific standards and evaluation 
                criteria to implement the standards specified in part 
                II and guidelines for an accreditation, certification, 
                enforcement, and information program for participating 
                States by not later than July 1, 1995.
                    ``(B) Adaptation to delivery systems.--The 
                Secretary shall adapt the standards specified in 
                subpart B of part II with respect to each particular 
                delivery system.
                    ``(C) Establishment of provisional standards.--With 
                respect to any health plan operating in an underserved 
                area (as designated by the State or the Secretary under 
                section 21601), the Secretary may adopt provisional 
                standards for use for not more than 3 years in lieu of 
                the standards specified in subpart B of part II.
            ``(2) Establishment of standards for reinsurance and risk 
        adjustment programs.--
                    ``(A) In general.--The Secretary shall develop 
                standards under subparagraphs (B), (C), and (D), for 
                participating States to provide reinsurance pools, risk 
                adjustment programs, and subsidy adjustment programs 
                under section 21023 for participation by standard 
                health plans as provided in section 21121.
                    ``(B) Mandatory reinsurance pools.--The standards 
                developed by the Secretary under this subparagraph 
                shall include a system of mandatory reinsurance which--
                            ``(i) specifies the manner of creation, 
                        structure, and operation of the system, 
                        including--
                                    ``(I) the manner (which may be 
                                prospective or retrospective) in which 
                                community-rated and self-insured 
                                standard health plans make payments to 
                                their respective systems, and
                                    ``(II) the type and level of 
                                reinsurance coverage provided;
                            ``(ii) provides for such health plans to 
                        make payments to the State-established 
                        reinsurance program for the purpose of 
                        eliminating incentives for plans to 
                        discriminate against individuals on the basis 
                        of their expected utilization of health 
                        services; and
                            ``(iii) provides such health plans with 
                        incentives to manage the care and health care 
                        costs of individuals with above-average needs 
                        (or expected needs) for health care services.
                    ``(C) Risk adjustment program.--
                            ``(i) In general.--The standards developed 
                        by the Secretary under this subparagraph shall 
                        include a risk adjustment program which--
                                    ``(I) assures that payments to 
                                community-rated standard health plans 
                                reflect the expected relative 
                                utilization and expenditures for health 
                                care services by each plan's enrollees 
                                compared to the average utilization and 
                                expenditures for community-rated 
                                individuals; and
                                    ``(II) protects plans that enroll a 
                                disproportionate share of such 
                                individuals with respect to whom 
                                expected utilization of health care 
                                services and expected health care 
                                expenditures for such services are 
                                greater than the average utilization 
                                and expenditures for such eligible 
                                individuals.
                            ``(ii) Factors to be considered.--In 
                        developing the standards for a risk adjustment 
                        program, the Secretary may take into account 
                        the following factors with respect to 
                        enrollees:
                                    ``(I) Demographic characteristics.
                                    ``(II) Health status.
                                    ``(III) Socio-economic status.
                                    ``(IV) Subsidy status.
                                    ``(V) Other factors determined 
                                appropriate by the Secretary.
                            ``(iii) Zero sum.--The standards for the 
                        risk adjustment program methodology shall 
                        assure that the total payments to all 
                        community-rated standard health plans after 
                        application of the methodology are the same as 
                        the amount of payments that would have been 
                        made without application of the methodology.
                    ``(D) Cost-sharing adjustment program.--The 
                standards developed by the Secretary under this 
                subparagraph shall include a cost-sharing adjustment 
                program which redistributes losses among all standard 
                health plans, except multistate self-insured health 
                plans, resulting from the reduced cost-sharing 
                obligations of individuals receiving assistance as is 
                provided under the program described in part B of title 
                XIX.
            ``(3) Establishment of capital standards.--
                    ``(A) In general.--The Secretary shall develop, in 
                consultation with the NAIC, by not later than July 1, 
                1995, a risk-based capital standards formula for health 
                plans under section 21122.
                    ``(B) No preemption.--Nothing in this title shall 
                preclude or preempt State law on, or regulation of, 
                health plan deposit reserve requirements.
            ``(4) Consultation with secretary of labor.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), in the case of multistate self-
                insured health plans, the Secretary, in consultation 
                with the Secretary of Labor, shall develop and publish 
                the standards for such plans.
                    ``(B) Reinsurance program.--The Secretary of Labor 
                shall develop, by not later than July 1, 1995, 
                standards for a reinsurance program for multistate 
                self-insured health plans under section 21121.
    ``(c) National Health Plan Standards and Quality Advisory 
Committee.--
            ``(1) Establishment.--The Secretary shall establish a 
        National Health Plan Standards and Quality Advisory Committee 
        (hereafter referred to in this subsection as the `Committee') 
        by March 1, 1995, to advise the Secretary on--
                    ``(A) standards and evaluation criteria to be used 
                in the certification of all plans;
                    ``(B) the use and accountability of funds from the 
                Health Security Trust Fund to support State 
                establishment of accreditation, certification, 
                enforcement, and information programs; and
                    ``(C) national measures of quality performance, 
                comparative value information criteria, population 
                health status measures, and other aspects of quality 
                and consumer information.
            ``(2) Number and appointment.--The Committee shall be 
        composed of the Administrator of the Agency for Health Care 
        Policy and Research, the Administrator of the Health Care 
        Financing Administration, and 11 members appointed by the 
        Secretary. The appointed members shall be broadly 
        representative of the population of the United States and shall 
        include--
                    ``(A) a representative of State insurance 
                commissioners or State health departments;
                    ``(B) a representative of health plans;
                    ``(C) a representative of employers purchasing 
                health care;
                    ``(D) a representative of health care providers;
                    ``(E) a representative of consumers of health care;
                    ``(F) a representative of associations of private 
                accreditation entities; and
                    ``(G) individuals distinguished in the fields of 
                law, medicine, economics, public health, and health 
                services research.
            ``(3) Terms.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), the appointed members of the 
                Committee shall serve for a term of 4 years.
                    ``(B) Staggered rotation.--Of the members first 
                appointed to the Committee under paragraph (2), the 
                Secretary shall appoint 4 members to serve for a term 
                of 4 years, 4 members to serve for a term of 3 years, 3 
                members to serve for a term of 2 years.
                    ``(C) Service beyond term.--An appointed member of 
                the Committee may continue to serve after the 
                expiration of the term of the member until a successor 
                is appointed.
            ``(4) Vacancies.--If an appointed member of the Committee 
        does not serve the full term applicable under paragraph (3), 
        the individual appointed to fill the resulting vacancy shall be 
        appointed for the remainder of the term of the predecessor of 
        the individual.
            ``(5) Chair.--The Secretary shall designate an individual 
        to serve as the chair of the Committee.
            ``(6) Meetings.--The Committee shall meet not less than 
        once during each 4-month period and shall otherwise meet at the 
        call of the Secretary or the chair.
            ``(7) Compensation and reimbursement of expenses.--Members 
        of the Committee shall receive compensation for each day 
        (including travel time) engaged in carrying out the duties of 
        the Committee. Such compensation may not be in an amount in 
        excess of the maximum rate of basic pay payable for level IV of 
        the Executive Schedule under section 5315 of title 5, United 
        States Code.
            ``(8) Staff.--The Secretary shall provide to the Committee 
        such staff, information, and other assistance as may be 
        necessary to carry out the duties of the Committee.
            ``(9) FACA not applicable.--The Federal Advisory Committee 
        Act (5 U.S.C. App.) shall not apply to the Committee.
    ``(d) Tax Qualification.--For favorable Federal income tax 
treatment which is available only to certified standard health plans, 
see sections 213(f) and 4521 of the Internal Revenue Code of 1986.

``SEC. 21102. CERTIFIED SUPPLEMENTAL HEALTH BENEFITS PLANS.

    ``(a) In General.--A supplemental health benefits plan shall meet 
the applicable reform standards established under subsection (b).
    ``(b) Establishment of Standards.--
            ``(1) In general.--Except as provided in paragraph (2), the 
        Secretary shall develop and publish specific standards to 
        implement the standards specified in part III by not later than 
        January 1, 1996.
            ``(2) Consultation with secretary of labor.--In the case of 
        multistate self-insured supplemental health benefits plans, the 
        Secretary, in consultation with the Secretary of Labor, shall 
        develop and publish the standards described in paragraph (1).
    ``(c) Tax Qualification.--For favorable Federal income tax 
treatment which is available only to certified supplemental health 
benefits plans, see section 4521 of the Internal Revenue Code of 1986.

``SEC. 21103. CERTIFIED LONG-TERM CARE POLICIES.

    ``(a) In General.--A long-term care policy shall meet the 
applicable reform standards established under subsection (b).
    ``(b) Establishment of Standards.--
            ``(1) In general.--Except as provided in paragraph (2), the 
        Secretary, in consultation with the NAIC, shall develop and 
        publish specific standards to implement the standards specified 
        in part IV by not later than September 1, 1996.
            ``(2) State standards.--Nothing in this title shall be 
        construed as preventing a participating State from applying 
        standards that provide greater protection to insured 
        individuals under long-term care policies than the standards 
        promulgated under this section, except that such State 
        standards may not be inconsistent with any of the standards 
        specified in part IV.
    ``(c) Tax Qualification.--For favorable Federal income tax 
treatment which is available only to certified long-term care policies, 
see section 7702B of the Internal Revenue Code of 1986.

``SEC. 21104. GENERAL RULES.

    ``(a) Construction.--Whenever in this subtitle a requirement or 
standard is imposed on a health plan, supplemental health benefits 
plan, or long-term care policy, the requirement or standard is deemed 
to have been imposed on the insurer or sponsor of the plan or policy in 
relation to that plan or policy.
    ``(b) Use of Interim, Final Regulations.--In order to permit the 
timely implementation of the provisions of this title, the Secretary 
and the Secretary of Labor are each authorized to issue regulations 
under this title on an interim basis that become final on the date of 
publication, subject to change based on subsequent public comment.
    ``(c) Reference to Reform Standards.--For purposes of this title, 
the term `reform standards' means the standards developed under this 
subtitle and applicable under parts II, III, and IV.

        ``PART II--STANDARDS APPLICABLE TO STANDARD HEALTH PLANS

                    ``Subpart A--Insurance Standards

``SEC. 21111. GUARANTEED ISSUE AND RENEWAL.

    ``(a) Issue.--
            ``(1) In general.--Except as otherwise provided in this 
        section, a standard health plan sponsor--
                    ``(A) offering a community-rated health plan shall 
                offer such plan to any community-rated individual 
                applying for coverage; and
                    ``(B) offering an experience-rated health plan or a 
                self-insured health plan shall offer such plan to any 
                experience-rated individual eligible for coverage under 
                the plan through the individual's experience-rated 
                employer.
            ``(2) Availability.--
                    ``(A) In general.--A community-rated standard 
                health plan shall be made available throughout the 
                entire community rating area in which such plan is 
                offered, including through any purchasing cooperative 
                choosing to offer such plan.
                    ``(B) Geographic limitations.--A community-rated 
                standard health plan may deny coverage under the plan 
                to a community-rated individual who resides outside the 
                community rating area in which such plan is offered, 
                but only if such denial is applied uniformly, without 
                regard to health status or insurability of individuals.
            ``(3) Application of capacity limits.--
                    ``(A) In general.--Subject to subparagraph (B), an 
                insured standard health plan may apply to the 
                appropriate certifying authority to cease enrolling 
                individuals under the plan if--
                            ``(i) the plan ceases to enroll any new 
                        individuals; and
                            ``(ii) the plan can demonstrate to the 
                        applicable certifying authority that its 
                        financial or provider capacity to serve 
                        previously covered groups or individuals (and 
                        additional individuals who will be expected to 
                        enroll because of affiliation with such 
                        previously covered groups or individuals) will 
                        be impaired if it is required to enroll other 
                        individuals.
                    ``(B) First-come-first-served.--An insured standard 
                health plan is only eligible to exercise the 
                limitations provided for in subparagraph (A) if such 
                plan provides for enrollment of individuals on a first-
                come-first-served basis (except in the case of 
                additional individuals described in subparagraph 
                (A)(ii)).
    ``(b) Renewal.--
            ``(1) In general.--Except as provided in paragraph (2), a 
        standard health plan that is issued to an individual shall be 
        renewed at the option of the individual.
            ``(2) Grounds for refusal to renew.--A health plan sponsor 
        may refuse to renew, or may terminate, a standard health plan 
        under this title only for--
                    ``(A) nonpayment of premiums;
                    ``(B) fraud on the part of the individual; or
                    ``(C) misrepresentation of material facts on the 
                part of the individual relating to an application for 
                coverage or claim for benefits.
    ``(c) FEHBP Plans.--Any standard health plan sponsor participating 
in the Federal Employees Health Benefits Program, and operating a 
standard health plan within a community rating area, shall offer a 
community-rated standard health plan in such area, except that this 
requirement shall not apply to nationwide plans under paragraphs (1), 
(2), and (3) of section 8903 of title 5, United States Code.
    ``(d) Certain Excluded Plans.--The provisions of this section, 
other than subsections (b) and (e)(2)(B), shall not apply to any 
religious fraternal benefit society in existence as of September 1993, 
which bears the risk of providing insurance to its members, and which 
is an organization described in section 501(c)(8) of the Internal 
Revenue Code of 1986 which is exempt from taxation under section 501(a) 
of such Code.
    ``(e) Application of Interim Standards.--
            ``(1) In general.--During the interim standards application 
        period, a health plan sponsor may only offer a health plan in a 
        State if such plan meets the standards specified in paragraph 
        (2).
            ``(2) Specified standards.--
                    ``(A) Issue.--The standards specified in subsection 
                (a) with respect to self-insured health plans.
                    ``(B) Renewal.--The standards specified in 
                subsection (b).
                    ``(C) Exit from market.--
                            ``(i) In general.--An insurer shall renew 
                        an insured health plan through a particular 
                        type of delivery system (as defined in section 
                        21100) with respect to a community-rated 
                        individual, unless such insurer--
                                    ``(I) elects not to renew all of 
                                its insured health plans using such 
                                delivery system issued to all such 
                                individuals in a State; and
                                    ``(II) provides notice to the 
                                appropriate certifying authority and to 
                                each such individual covered under the 
                                plan of such termination at least 180 
                                days before the date of expiration of 
                                the plan.
                            ``(ii) Prohibition on market reentry.--In 
                        the case of such a termination, such insurer 
                        may not provide for the issuance of any insured 
                        health plan using such a delivery system to a 
                        community-rated individual in such State during 
                        the 5-year period beginning on the date of the 
                        termination of the last plan not so renewed.
            ``(3) Interim standards application periods.--The interim 
        standards application period is--
                    ``(A) in the case of the standard specified in 
                paragraph (2)(A), on or after January 1, 1995, and 
                before January 1, 1996;
                    ``(B) in the case of the standards specified in 
                paragraph (2)(B), on or after June 28, 1994, and before 
                January 1, 1996; and
                    ``(C) in the case of the standard specified in 
                paragraph (2)(C), on or after the date of the enactment 
                of this title, and before January 1, 1996.
            ``(4) Preemption.--The requirements of this subsection do 
        not preempt any State law unless State law directly conflicts 
        with such requirements. The provision of additional protections 
        under State law shall not be considered to directly conflict 
        with such requirements. The Secretary may issue letter 
        determinations with respect to whether this subsection preempts 
        a provision of State law.
            ``(5) Construction.--The provisions of this subsection 
        shall be construed in a manner that assures, to the greatest 
        extent practicable, continuity of health benefits under health 
        plans in effect on the effective date of this title.
            ``(6) Special rules for acquisitions and transfers.--The 
        Secretary may issue regulations regarding the application of 
        this subsection in the case of health plans (or groups of such 
        plans) which are transferred from one health plan sponsor to 
        another sponsor through assumption, acquisition, or otherwise.

``SEC. 21112. ENROLLMENT.

    ``(a) Enrollment Process.--
            ``(1) In general.--A standard health plan shall establish 
        an enrollment process consistent with this subsection.
            ``(2) Initial enrollment period.--Each individual shall 
        have an initial enrollment period in which to enroll in a 
        standard health plan--
                    ``(A) except as provided in subparagraph (B), 
                beginning on January 1, 1996, and ending on March 31, 
                1996,
                    ``(B) with respect to premium subsidy eligible 
                individuals described in section 1952(a)(2)(A)(i) in 
                States which have not established a premium subsidy 
                program in 1996, beginning on January 1, 1997, and 
                ending on March 31, 1997.
            ``(3) General enrollment period.--Each standard health plan 
        shall permit eligible individuals to enroll (or change 
        enrollment) in the plan during each general annual enrollment 
        period specified by the appropriate certifying authority under 
        section 21024.
            ``(4) Special enrollment periods.--In the case of an 
        individual who--
                    ``(A) through marriage, separation, divorce, birth 
                or adoption of a child, death, or similar 
                circumstances, experiences a change in family 
                composition;
                    ``(B) experiences a change in employment status 
                (including a significant change in the terms and 
                conditions of employment) or in continuation coverage;
                    ``(C) changes residence to another community rating 
                area;
                    ``(D) disenrolls for cause from a standard health 
                plan; or
                    ``(E) is subject to the decertification of a 
                standard health plan under section 21012,
        each standard health plan shall provide for a special 
        enrollment period in which the employee or individual is 
        permitted to change the individual or family basis of coverage 
        or the plan in which the employee or individual is enrolled. 
        The circumstances under which such special enrollment periods 
        are required and the duration of such periods shall be 
        specified in the reform standards.
    ``(b) Commencement of Coverage.--
            ``(1) In general.--In the case of an individual who enrolls 
        with a standard health plan during an enrollment period, 
        coverage under the plan shall begin on such date (not later 
        than the first day of the first month that begins at least 15 
        days after the date of enrollment) as the reform standards 
        specify.
            ``(2) Newborns.--In the event of the birth or adoption of a 
        child of an enrollee, coverage of such child under such 
        enrollee's standard health plan (regardless of the class of 
        enrollment) shall begin on the date of such birth or adoption 
        and shall continue, in the absence of any enrollment of such 
        child during a special enrollment period provided under 
        subsection (a)(4), for at least 45 days.

``SEC. 21113. RATING LIMITATIONS FOR COMMUNITY-RATED MARKET.

    ``(a) Standard Premiums With Respect to Community-Rated Eligible 
Individuals.--Each standard health plan which covers community-rated 
individuals shall establish within each community rating area in which 
the plan is to be offered a standard premium for individual enrollment 
for--
            ``(1) the standard benefits package established under 
        subtitle C, and
            ``(2) the alternative standard benefits package established 
        under subtitle C.
    ``(b) Uniform Premiums Within Community Rating Areas.--
            ``(1) In general.--Subject to paragraphs (2) and (3), the 
        standard premium for each package described in subsection (a) 
        for all community-rated individuals within a community rating 
        area shall be the same and shall not include the costs of 
        premium processing, enrollment, and marketing that would vary 
        depending on whether the method of enrollment is through a 
        purchasing cooperative, or directly through a health plan, an 
        employer, or a broker.
            ``(2) Application to enrollees.--
                    ``(A) In general.--The premium charged for coverage 
                in a standard health plan which covers community-rated 
                individuals shall be the product of--
                            ``(i) the standard premium (established 
                        under paragraph (1));
                            ``(ii) in the case of enrollment other than 
                        individual enrollment, the family adjustment 
                        factor specified under subparagraph (B); and
                            ``(iii) the age adjustment factor 
                        (specified under subparagraph (C)).
                    ``(B) Family adjustment factor.--
                            ``(i) In general.--The reform standards 
                        shall specify family adjustment factors that 
                        reflect the relative actuarial costs of benefit 
                        packages based on family classes of enrollment 
                        (as compared with such costs for individual 
                        enrollment).
                            ``(ii) Classes of enrollment.--For purposes 
                        of this title, there are 6 classes of 
                        enrollment:
                                    ``(I) Coverage only of an 
                                individual (other than an individual 
                                described in subclause (II)) (referred 
                                to in this title as the `individual' 
                                enrollment or class of enrollment).
                                    ``(II) Coverage only of an 
                                individual who has not attained age 18 
                                (referred to in this title as the 
                                `single child' enrollment or class of 
                                enrollment).
                                    ``(III) Coverage only of two or 
                                more children (referred to in this 
                                title as the `multiple children' 
                                enrollment or class of enrollment).
                                    ``(IV) Coverage of a married couple 
                                without children (referred to in this 
                                title as the `couple-only' enrollment 
                                or class of enrollment).
                                    ``(V) Coverage of an individual and 
                                one or more children (referred to in 
                                this title as the `single parent' 
                                enrollment or class of enrollment).
                                    ``(VI) Coverage of a married couple 
                                and one or more children (referred to 
                                in this title as the `dual parent' 
                                enrollment or class of enrollment).
                            ``(iii) References to family and couple 
                        classes of enrollment.--In this title:
                                    ``(I) Family.--The terms `family 
                                enrollment' and `family class of 
                                enrollment' refer to enrollment in a 
                                class of enrollment described in any 
                                subclause of clause (ii) (other than 
                                subclause (I)).
                                    ``(II) Couple.--The term `couple 
                                class of enrollment' refers to 
                                enrollment in a class of enrollment 
                                described in subclause (IV) or (VI) of 
                                clause (ii).
                            ``(iv) Spouse; married; couple.--
                                    ``(I) In general.--In this title, 
                                the terms `spouse' and `married' mean, 
                                with respect to an individual, another 
                                individual who is the spouse of, or is 
                                married to, the individual, as 
                                determined under applicable State law.
                                    ``(II) Couple.--The term `couple' 
                                means an individual and the 
                                individual's spouse.
                    ``(C) Age adjustment factor.--The Secretary, in 
                consultation with the NAIC, shall specify uniform age 
                categories and rating increments for age adjustment 
                factors that reflect the relative actuarial costs of 
                benefit packages among enrollees. For individuals who 
                have attained age 18 but not age 65, the highest age 
                adjustment factor may not exceed twice the lowest age 
                adjustment factor.
            ``(3) Administrative charges.--
                    ``(A) In general.--In accordance with the reform 
                standards, a standard health plan which covers 
                community-rated individuals may add a separately-stated 
                administrative charge which is based on identifiable 
                differences in marketing and other legitimate 
                administrative costs which vary by size of the 
                enrolling group and method of enrollment, including 
                enrollment directly through a health plan, an employer, 
                or a broker (as defined in such standards).
                    ``(B) Application.--The administrative charge for 
                any plan described in subparagraph (A) shall be applied 
                uniformly with respect to group size and method of 
                enrollment and the Secretary shall specify the 
                permitted variation in the administrative charge of a 
                plan.
                    ``(C) Disallowance of separate charge on 
                cooperative.--No standard health plan which covers 
                community-rated individuals may impose a separately-
                stated administrative charge for enrollment through any 
                purchasing cooperative.
    ``(c) Treatment of Negotiated Rate as Community Rate.--
Notwithstanding any other provision of this section, a standard health 
plan which covers community-rated individuals in a community rating 
area may only charge a premium for any coverage which is the same as 
the premium for such coverage when it is offered through a purchasing 
cooperative in such area.

``SEC. 21114. RATING PRACTICES AND PAYMENT OF PREMIUMS.

    ``(a) Full Disclosure of Rating Practices.--
            ``(1) In general.--At the time a health plan sponsor offers 
        a standard health plan, such sponsor shall fully disclose 
        rating practices for such plan to the appropriate certifying 
        authority.
            ``(2) Notice on expiration.--A health plan sponsor 
        providing a standard health plan shall provide for notice, at 
        least 60 days before the date of expiration of the plan, of the 
        terms for renewal of the plan.
            ``(3) Actuarial certification.--Each health plan sponsor 
        shall file annually with the appropriate certifying authority a 
        written statement by a member of the American Academy of 
        Actuaries (or other individual acceptable to such authority) 
        certifying that, based upon an examination by the individual 
        which includes a review of the appropriate records and of the 
        actuarial assumptions of such sponsor and methods used by such 
        sponsor in establishing premium rates for insured standard 
        health plans--
                    ``(A) such sponsor is in compliance with the 
                applicable provisions of this section; and
                    ``(B) the rating methods are actuarially sound.
        Each such sponsor shall retain a copy of such statement at its 
        principal place of business for examination by any individual.
    ``(b) Payment of Premiums.--
            ``(1) In general.--With respect to a new enrollee in a 
        standard health plan, the plan may require advanced payment of 
        an amount equal to the monthly applicable premium for the plan 
        at the time such individual is enrolled.
            ``(2) Notification of failure to receive premium.--If a 
        standard health plan fails to receive payment on a premium due 
        with respect to an individual covered under the plan, the plan 
        shall provide notice of such failure to the individual within 
        the 20-day period after the date on which such premium payment 
        was due.

``SEC. 21115. NONDISCRIMINATION BASED ON HEALTH STATUS.

    ``(a) In General.--Except as provided under subsection (b), a 
standard health plan may not--
            ``(1) deny, limit, or condition the coverage under (or 
        benefits of) the plan;
            ``(2) engage, directly or through contractual arrangements, 
        in any activity, including the selection of a service area; and
            ``(3) in the case of a self-insured standard health plan, 
        vary the premium,
based on the health status, medical condition, claims experience, 
receipt of health care, medical history, anticipated need for health 
care expenses, disability, or lack of evidence of insurability, of an 
individual.
    ``(b) Treatment of Preexisting Condition Exclusions for All 
Services.--
            ``(1) In general.--Subject to paragraph (4), a standard 
        health plan may impose a limitation or exclusion of benefits 
        relating to treatment of a condition based on the fact that the 
        condition preexisted the effective date of the plan with 
        respect to an individual only if--
                    ``(A) the condition was diagnosed or treated during 
                the 3-month period ending on the day before the date of 
                enrollment under the plan;
                    ``(B) the limitation or exclusion extends for a 
                period not more than 6 months after the date of 
                enrollment under the plan;
                    ``(C) the limitation or exclusion does not apply to 
                an individual who, as of the date of birth, was covered 
                under the plan; or
                    ``(D) the limitation or exclusion does not apply to 
                pregnancy.
            ``(2) Crediting of previous coverage.--A standard health 
        plan shall provide that if an individual under such plan is in 
        a period of continuous coverage as of the date of enrollment 
        under such plan, any period of exclusion of coverage with 
        respect to a preexisting condition shall be reduced by 1 month 
        for each month in the period of continuous coverage.
            ``(3) Definitions.--As used in this subsection:
                    ``(A) Period of continuous coverage.--The term 
                `period of continuous coverage' means the period 
                beginning on the date an individual is enrolled under a 
                health plan or health care program which provides 
                benefits equivalent to those provided by the plan in 
                which the individual is seeking to enroll with respect 
                to coverage of a preexisting condition and ends on the 
                date the individual is not so enrolled for a continuous 
                period of more than 3 months.
                    ``(B) Preexisting condition.--The term `preexisting 
                condition' means, with respect to coverage under a 
                standard health plan, a condition which was diagnosed, 
                or which was treated, within the 3-month period ending 
                on the day before the date of enrollment (without 
                regard to any waiting period).
            ``(4) Special rule for 1996.--This subsection shall be 
        applied for calendar year 1996 by substituting `6-month' for 
        `3-month' in paragraph (1)(A).
            ``(5) Prohibition on preexisting condition exclusion during 
        amnesty period.--This subsection shall not apply during an 
        initial enrollment period described in section 21112(a)(2).
    ``(c) Application of Interim Standards.--
            ``(1) In general.--During the interim standards application 
        period, a health plan sponsor may only offer a self-insured 
        health plan in a State if such plan meets the standards 
        specified in paragraph (2).
            ``(2) Specified standards.--
                    ``(A) Issue.--The standards specified in subsection 
                (a) with respect to self-insured health plans.
                    ``(B) Coverage.--A self-insured health plan may not 
                reduce or limit coverage of any condition or course of 
                treatment that is expected to cost not less than $5,000 
                during any 12-month period.
            ``(3) Interim standards application periods.--The interim 
        standards application period is--
                    ``(A) in the case of the standard specified in 
                paragraph (2)(A), on or after January 1, 1995, and 
                before January 1, 1996; and
                    ``(B) in the case of the standards specified in 
                paragraph (2)(B), on or after June 28, 1994, and before 
                January 1, 1996.
            ``(4) Application of rules.--Paragraphs (4), (5), and (6) 
        of section 21111(e) shall apply to this subsection.

``SEC. 21116. BENEFITS OFFERED.

    ``A standard health plan shall offer to all enrollees in the plan 
the standard benefits package or the alternative standard benefits 
package established under subtitle C.

                 ``Subpart B--Delivery System Standards

``SEC. 21121. REINSURANCE, RISK ADJUSTMENT, AND COST-SHARING 
              ADJUSTMENT.

    ``(a) Community-Rated Plans.--Each community-rated standard health 
plan shall participate in a reinsurance pool, risk adjustment program, 
and cost-sharing adjustment program of the State described in section 
21101(b)(2).
    ``(b) Experience-Rated Plans.--Each experience-rated health plan 
shall participate in a cost-sharing adjustment program described in 
section 21101(b)(2).
    ``(c) Self-Insured Plans.--
            ``(1) In general.--Except as provided in paragraph (2), 
        each self-insured standard health plan shall participate in a 
        reinsurance pool and the cost-sharing adjustment program of the 
        State described in section 21101(b)(2).
            ``(2) Multistate plans.--Each multistate self-insured 
        standard health plan shall participate in a reinsurance program 
        developed under section 21101(b)(4)(B).
    ``(d) Hold-Harmless Protections.--Each standard health plan shall 
hold individual providers harmless from the effects of the cost-sharing 
assistance program under section 1953(b).

``SEC. 21122. CAPITAL REQUIREMENTS.

    ``Each standard health plan shall meet the risk-based capital 
standards formula applicable to such plan under the standards 
established under section 21101(b)(3).

``SEC. 21123. COLLECTION AND PROVISION OF STANDARDIZED INFORMATION.

    ``(a) Health Plans Required To Submit Information to Program.--Each 
standard health plan offered or operated in a State shall submit to the 
consumer information program of such State established under section 
21013 the program descriptive information regarding--
            ``(1) certification status of the plan;
            ``(2) benefits offered under the plan;
            ``(3) premiums, cost-sharing, and administrative charges 
        under the plan;
            ``(4) risk and referral arrangements under the plan;
            ``(5) health care providers used under the plan and the 
        availability of such providers;
            ``(6) the enrollee complaint and appeals process used under 
        the plan; and
            ``(7) other appropriate information as determined by the 
        Secretary.
The submission of such information shall be in the form of 
nonidentifiable health information (as defined in section 11702(7)).
    ``(b) Additional Requirements.--Each standard health plan shall 
meet the requirements specified under subtitles B and C of title XI 
with respect to such plans.

``SEC. 21124. QUALITY IMPROVEMENT AND ASSURANCE.

    ``(a) In General.--Each standard health plan shall--
            ``(1) develop and implement an internal quality improvement 
        program designed to measure, assess, and improve enrollee 
        health status, enrollee outcomes, enrollee processes of care, 
        and enrollee satisfaction;
            ``(2) develop and implement quality improvement goals based 
        on the results of population health status measurements 
        conducted under subtitle E; and
            ``(3) maintain a program to assure that the quality of 
        health care services furnished to enrollees meets minimum 
        standards of safety and clinical practice.
    ``(b) Utilization Management.--
            ``(1) In general.--Each standard health plan shall provide 
        that all review determinations shall be made by licensed or 
        certified health professionals with appropriate clinical 
        training.
            ``(2) Additional standards.--Each standard health plan 
        shall base utilization management on current scientific 
        knowledge, stress the efficient delivery of health care and 
        outcomes, rely primarily on evaluating and comparing practice 
        patterns rather than routine case-by-case review, and be 
        consistent and timely in application.
            ``(3) No financial incentives.--Utilization management by 
        each standard health plan may not create direct financial 
        incentives for reviewers to reduce or limit medically necessary 
        or appropriate services.
            ``(4) Consumer disclosure.--Each standard health plan shall 
        disclose, upon request, to enrollees (and prospective 
        enrollees) and to participating providers (and prospective 
        providers) the utilization review protocols used by the plan, 
        while protecting proprietary business information to the extent 
        specified by the Secretary in the reform standards.
    ``(c) Credentialing.--Each standard health plan shall--
            ``(1) credential participating physicians and 
        practitioners; and
            ``(2) ensure that participating providers and facilities 
        are appropriately accredited, certified, and licensed.
    ``(d) Continuity of Care.--Each standard health plan shall develop 
and implement mechanisms for coordinating the delivery of care across 
provider settings.
    ``(e) Medical Recordkeeping.--Each standard health plan shall 
assure that pertinent information is readily available to appropriate 
professionals.

``SEC. 21125. PATIENT PROTECTIONS AND PROVIDER SELECTION.

    ``(a) Patient Information.--Each standard health plan shall provide 
to enrollees clear descriptive information about the rights and 
responsibilities of enrollees.
    ``(b) Information Regarding a Patient's Right to Self-Determination 
in Health Care Services.--Each standard health plan shall--
            ``(1) provide written information to each individual 
        enrolling in such plan of--
                    ``(A) such individual's right under State law 
                (whether statutory or as recognized by the courts of 
                the State) to make decisions concerning medical care, 
                including the right to accept or refuse medical 
                treatment and the right to formulate advance directives 
                (as defined in section 1866(f)(3)), and
                    ``(B) the written policies of the plan with respect 
                to such right;
            ``(2) provide for educational activities for patients and 
        participating providers; and
            ``(3) require participating primary care physicians to 
        include in their patients' charts the wishes of the patient 
        concerning advance directives.
    ``(c) Confidentiality of Patient Records.--Each standard health 
plan shall have explicit procedures to protect the confidentiality of 
individual patient information consistent with the rules established 
under subtitle C of title XI.
    ``(d) Marketing.--No insurer may engage in selective marketing that 
would have the effect of avoiding high-risk subscribers within a 
community rating area. Marketing materials may not contain false or 
materially misleading information.
    ``(e) No Patient Liability for Unpaid Plan Obligations.--Each 
standard health plan shall hold enrollees harmless with respect to any 
plan obligations for payment to providers.
    ``(f) Remedies and Enforcement.--
            ``(1) In general.--Each standard health plan shall comply 
        with the remedies and enforcement requirements described in 
        subtitle H.
            ``(2) Grievance process.--Each standard health plan shall 
        establish a grievance process for enrollees dissatisfied with 
        matters other than the denial of payment or provision of 
        benefits by the plan.
    ``(g) Provider Selection.--
            ``(1) In general.--In selecting among providers of health 
        services for membership in a provider network, or in 
        establishing the terms and conditions of such membership, a 
        standard health plan may not engage in any practice that 
        discriminates against a provider based on the health status of 
        a patient of the provider.
            ``(2) No discrimination based on academic degree.--No 
        standard health plan may discriminate in participation, 
        reimbursement, or indemnification against a health professional 
        solely on the basis of the academic degree of such professional 
        if the professional is acting within the scope of the 
        professional's license under applicable State law.
            ``(3) Number and type.--Nothing in this title shall--
                    ``(A) prevent a standard health plan from matching 
                the number and type of health care providers to the 
                needs of the plan members;
                    ``(B) require any such plan to contract with any 
                type of provider legally authorized to provide services 
                in the State in which such services are provided; or
                    ``(C) except as specifically provided in this 
                title, establish any other measure designed to maintain 
                quality or to control costs.
    ``(h) Physician Incentive Plans.--A standard health plan may not 
operate a physician incentive plan unless such incentive plan meets the 
requirements of section 1876(i)(8)(A).
    ``(i) Physician Participation.--
            ``(1) In general.--Each standard health plan shall 
        establish mechanisms through which physicians have input into 
        matters affecting patient care and through which patients have 
        the ability to choose any primary care physician from available 
        practitioners.
            ``(2) Contract procedures.--Each standard health plan shall 
        provide not less than 30 days notification to physicians of 
        decisions to cancel or deny renewal of contracts and shall 
        establish an informal, non-binding, and advisory review process 
        for appeals.
    ``(j) Ethical Business Conduct.--Each standard health plan shall 
develop and implement a code of ethical business conduct for its 
activities, including those of its components, and assure proficient 
management and planning functions.
    ``(k) Enrollment.--A standard health plan may not knowingly accept 
the enrollment of an individual who is enrolled in another standard 
health plan.

``SEC. 21126. ALTERNATIVE DISPUTE RESOLUTION PROCEDURES RELATING TO 
              MALPRACTICE CLAIMS.

    ``Each standard health plan shall establish and maintain an 
alternative dispute resolution procedures program that complies with 
the standards developed under section 1129.

``SEC. 21127. ACCESS TO ESSENTIAL COMMUNITY PROVIDERS.

    ``(a) In General.--Each standard health plan sponsor shall, with 
respect to at least one of each category of essential community 
provider (as defined in subsection (c)) located within health plan 
service areas designated under section 21022, offer to enter into a 
written provider participation agreement (described in subsection (b)) 
with the provider covering the 5-year period beginning on January 1, 
1996. The Secretary may require participation agreements to be offered 
to more than one essential community provider in each category if the 
Secretary determines extra capacity is required to serve the needs of 
enrollees in a particular health plan service area.
    ``(b) Participation Agreement.--A participation agreement between a 
standard health plan sponsor and an essential community provider under 
this subsection shall provide that the plan agrees to treat the 
provider in accordance with terms and conditions at least as favorable 
as those that are applicable to other providers with a participation 
agreement with the plan with respect to the scope of services and the 
basis for which payment is made by the plan to the provider.
    ``(c) Essential Community Providers Described.--In this section, an 
`essential community provider' means any of the following entities 
certified by the Secretary:
            ``(1) Migrant health centers.--A recipient or subrecipient 
        of a grant under section 329 of the Public Health Service Act.
            ``(2) Community health centers.--A recipient or 
        subrecipient of a grant under section 330 of such Act.
            ``(3) Homeless program providers.--A recipient or 
        subrecipient of a grant under section 340 of such Act.
            ``(4) Public housing providers.--A recipient or 
        subrecipient of a grant under section 340A of such Act.
            ``(5) Family planning clinics.--A recipient or subrecipient 
        of a grant under title X of such Act.
            ``(6) Indian health programs.--A service unit of the Indian 
        Health Service, a tribal organization, or an urban Indian 
        program, as defined in the Indian Health Care Improvement Act.
            ``(7) HIV providers under ryan white act.--A public or 
        private nonprofit health care provider that is a recipient or 
        subrecipient of a grant under title XXVI of the Public Health 
        Service Act.
            ``(8) Maternal and child health providers.--A public or 
        private nonprofit entity that provides prenatal care, pediatric 
        care, or ambulatory services to children, including children 
        with special health care needs, and that receives funding for 
        such care or services under title V of the Social Security Act.
            ``(9) Federally qualified health centers.--A Federally 
        qualified health center (as defined in section 1861(aa)(4)) or 
        an entity that would be such a center but for its failure to 
        meet the requirement described in section 329(f)(2)(G)(i) of 
        the Public Health Service Act or the requirement described in 
        section 330(e)(3)(G)(i) of such Act (relating to the 
        composition of the entity's governing board).
            ``(10) Rural health clinics.--A rural health clinic (as 
        defined in section 1861(aa)(2)).
            ``(11) Provider of school health services.--A provider of 
        school health services.
            ``(12) Community networks.--A community network receiving 
        development funding in designated urban or rural underserved 
        areas under subtitle F.
            ``(13) Certain hospitals.--A public hospital or non-profit 
        hospital meeting the criteria for public hospitals which are 
        covered entities under section 340B of the Public Health 
        Service Act, with a disproportionate patient percentage (as 
        defined in section 1886(d)(5)(F)(vi)) greater than 11.75 
        percent.
            ``(14) Children's hospitals.--A children's hospital meeting 
        criteria comparable to paragraph (13) as determined appropriate 
        by the Secretary.
During the 5-year period described in subsection (a), the reform 
standards may be modified for the designation of additional health 
professionals and institutions as essential community providers to the 
extent the Secretary determines that standard health plans would not be 
able to assure adequate access to the standard benefits package 
established under subtitle C in a health plan service area without such 
designation.
    ``(d) Subrecipient Defined.--In this section, the term 
`subrecipient' means, with respect to a recipient of a grant under a 
particular authority, an entity that--
            ``(1) is receiving funding from such a grant under a 
        contract with the principal recipient of such a grant, and
            ``(2) meets the requirements established to be a recipient 
        of such a grant.
    ``(e) Study.--During the 5-year period described in subsection (a), 
the Office of Technology Assessment shall conduct a continuing study on 
improving access in underserved areas.

``SEC. 21128. HEALTH PLAN SERVICE AREA CAPACITY.

    ``(a) Availability of Services in Entire Health Plan Service 
Area.--On and after January 1, 2001, each standard health plan shall 
have the capacity within the plan's network, or through contracts with 
a sufficient number, distribution, and variety of providers, to deliver 
to all parts of any health plan service area (designated under section 
21022) in which such plan is offered, with reasonable promptness and in 
a manner which assures continuity, the standard benefits package 
established under subtitle C and any benefits offered by such sponsor 
through certified supplemental health benefits plans. Such capacity 
shall include the provision of emergency services 24 hours a day, 7 
days a week.
    ``(b) Capability.--Each standard health plan shall make available 
and accessible translation, case management, and transportation 
services, if necessary, to deliver the benefits and services described 
in subsection (a).
    ``(c) Diversity.--Each standard health plan shall ensure that 
criteria for the selection of participating providers take into account 
the needs of diverse populations within a health plan service area 
served by the plan.
    ``(d) Application of Standards to Self-Insured Plans.--The 
standards specified in this section shall apply to self-insured 
standard health plans, but only to the extent necessary to deliver 
services to individuals enrolled in such plans.

``SEC. 21129. ACCESS TO SPECIALIZED SERVICES.

    ``(a) In General.--Each standard health plan shall have within the 
plan's network, or contract with, a sufficient number, distribution, 
and variety of providers of specialized services to assure that such 
services are available and accessible to adults, infants, children, and 
persons with disabilities.
    ``(b) Centers of Excellence.--
            ``(1) In general.--A standard health plan may satisfy the 
        standard under subsection (a) by contracting with, and 
        demonstrating sufficient referrals (as determined by standards 
        set by the Secretary) of, adults, infants, children, and 
        persons with disabilities requiring specialized services to 
        centers of excellence designated by the Secretary under 
        subsection (a). For children, such specialized treatment 
        expertise shall be in pediatrics.
            ``(2) Requirements for centers.--The Secretary shall 
        designate centers of excellence in the field of institutional 
        care that meet evaluation criteria established by the Secretary 
        for the delivery of care for complex cases requiring 
        specialized treatment and also meet 2 or more of the following 
        requirements:
                    ``(A) Provide specialized education and training 
                through approved graduate medical education programs 
                with multi-specialty, multi-disciplinary teaching and 
                services in both inpatient and outpatient settings, 
                with medical staff with faculty appointments at an 
                affiliated medical school.
                    ``(B) Attract patients from outside the center's 
                local geographic region.
                    ``(C) Either sponsor or participate in, or have 
                medical staff who participate in, peer-reviewed 
                research.
    ``(c) Other Evaluation Criteria for Specialized Services 
Standards.--Reform standards shall include evaluation criteria 
determined by the Secretary for the standard under subsection (a) for 
standard health plans which choose to provide specialized services 
within a network setting, including requirements for staff credentials 
and experience, and requirements for measured outcomes in the diagnosis 
and treatment of patients. For children, such specialized treatment 
expertise shall be in pediatrics.
    ``(d) Outcomes Criteria.--The Secretary shall develop evaluation 
criteria for outcomes of specialized services as research findings 
become available.

``SEC. 21130. PARTICIPATING PHYSICIAN PROGRAM.

    ``Each standard health plan shall establish a program under which 
participating physicians shall agree to accept the plan's payment 
schedule as payment in full, and agree not to charge patients more than 
the co-insurance required by such plan. Each such plan shall make 
available the list of participating physicians to enrollees. Each plan 
shall have an appropriate number of physicians in each specialty as 
participating physicians.

``SEC. 21131. OUT-OF-AREA COVERAGE.

    ``Each standard health plan shall provide for urgent and emergency 
out-of-area coverage for enrollees of the plan.

 ``PART III--STANDARDS APPLICABLE TO SUPPLEMENTAL HEALTH BENEFITS PLANS

``SEC. 21141. IMPOSITION OF REQUIREMENTS ON SUPPLEMENTAL HEALTH 
              BENEFITS PLANS.

    ``(a) In General.--In the case of a supplemental health benefits 
plan--
            ``(1) which is a supplemental services plan (as defined in 
        subsection (b)(2)), the requirements of section 21142 shall be 
        met with respect to the plan; and
            ``(2) which is a cost-sharing plan (as defined in 
        subsection (b)(3)), the requirements of section 21143 shall be 
        met with respect to the plan.
    ``(b) Plans Defined.--In this title:
            ``(1) Supplemental health benefits plan.--The term 
        `supplemental health benefits plan' means a supplemental 
        services plan or a cost-sharing plan.
            ``(2) Supplemental services plan.--The term `supplemental 
        services plan' means a health plan which provides--
                    ``(A) coverage for services and items not included 
                in the standard benefits package established under 
                subtitle C,
                    ``(B) coverage for items and services included in 
                such package but not covered because of a limitation in 
                amount, duration, or scope of benefits, or
                    ``(C) both.
            ``(3) Cost-sharing plan.--The term `cost-sharing plan' 
        means a health plan which provides coverage for deductibles, 
        coinsurance, and copayments imposed as part of the standard 
        benefits package established under subtitle C.

``SEC. 21142. STANDARDS FOR SUPPLEMENTAL SERVICES PLANS.

    ``(a) Application of Certain Health Plan Standards.--
            ``(1) In general.--Except as provided in paragraph (3), the 
        standards specified in paragraph (2) shall apply with respect 
        to each supplemental services plan in the same manner as such 
        standards apply with respect to a certified standard health 
        plan.
            ``(2) Specified standards.--The standards specified in this 
        paragraph are as follows:
                    ``(A) Section 21111 (relating to guaranteed issue 
                and renewal).
                    ``(B) Section 21112 (relating to enrollment).
                    ``(C) Section 21113 (relating to rating limitations 
                for community-rated market).
                    ``(D) Section 21114 (relating to rating practices 
                and payment of premiums).
                    ``(E) Section 21115 (relating to nondiscrimination 
                based on health status).
                    ``(F) Section 21123 (relating to collection and 
                provision of standardized information).
                    ``(G) Section 21124 (relating to quality 
                improvement and assurance).
                    ``(H) Section 21125 (relating to patient 
                protections and provider selection).
    ``(b) Prohibiting Duplication of Coverage.--No health plan sponsor 
or any other person may offer to any medicare-eligible individual a 
supplemental services plan that duplicates any coverage provided under 
the medicare program under title XVIII.
    ``(c) Restrictions on Marketing Abuses.--Not later than January 1, 
1996, the Secretary shall develop (in consultation with the States) 
minimum standards that prohibit marketing practices by entities 
offering supplemental services plans that involve--
            ``(1) providing monetary incentives for, or tying or 
        otherwise conditioning, the sale of the plan to enrollees in a 
        certified standard health plan of the entity;
            ``(2) using or disclosing to any party information about 
        the health status or claims experience of participants in a 
        certified standard health plan for the purpose of marketing a 
        supplemental services plan; and
            ``(3) providing a supplemental services plan by a managed 
        care plan to an individual not enrolled in such managed care 
        plan.

``SEC. 21143. STANDARDS FOR COST-SHARING PLANS.

    ``(a) Rules for Offering of Plans.--A cost-sharing plan may be 
offered to an individual only if--
            ``(1) the plan is offered by a certified standard health 
        plan with a standard benefits package in which the individual 
        is enrolled;
            ``(2) the certified standard health plan offers the cost-
        sharing plan to all individuals enrolled in the certified 
        standard health plan and only such individuals; and
            ``(3) the cost-sharing plan is offered only during an 
        enrollment period for the applicable certified standard health 
        plan.
Nothing in this subsection shall be construed to require an individual 
to obtain a cost-sharing plan or a certified standard health plan to 
provide a cost-sharing plan.
    ``(b) Equivalent Coverage for All Services.--Each cost-sharing plan 
shall provide coverage for items and services in the standard benefits 
package established under subtitle C to the same extent as the 
applicable certified standard health plan provides coverage for all 
items and services in such package.
    ``(c) Requirements for Pricing.--The price of any cost-sharing plan 
shall--
            ``(1) be the same for each individual to whom the plan is 
        offered; and
            ``(2) take into account any expected increase in 
        utilization resulting from the purchase of the plan by 
        individuals enrolled in the applicable certified standard 
        health plan.

``SEC. 21144. PROHIBITION ON OFFERING OF MULTIPLE PACKAGES TO 
              INDIVIDUAL.

    ``A supplemental health benefits plan may not be offered to an 
individual who is covered under another such plan, unless the 
individual's coverage under the new plan begins only after the 
individual's coverage under the original plan is terminated.

       ``PART IV--STANDARDS APPLICABLE TO LONG-TERM CARE POLICIES

``SEC. 21151. REGULATION OF SALES PRACTICES.

    ``(a) Duty of Good Faith and Fair Dealing.--
            ``(1) In general.--Each carrier that is selling or offering 
        for sale a long-term care policy has the duty of good faith and 
        fair dealing to the purchaser or potential purchaser of such a 
        policy.
            ``(2) Policy replacement form.--With respect to any 
        individual who elects to replace or effect a change in a long-
        term care policy, the carrier that is selling such policy shall 
        ensure that such individual completes a policy replacement form 
        developed as part of the reform standards. A copy of such form 
        shall be provided to such individual and additional copies 
        shall be delivered by the carrier to the old policy carrier and 
        kept on file by the new carrier for inspection by the 
        appropriate certifying authority.
            ``(3) Prohibited practices.--A carrier is considered to 
        have violated paragraph (1) if the carrier engages in any of 
        the following practices:
                    ``(A) Misleading representation.--Knowingly making 
                any misleading representation (including the inaccurate 
                completion of medical histories) or incomplete or 
                fraudulent comparison of any long-term care policy or 
                insurers for the purpose of inducing, or tending to 
                induce, any person to retain or effect a change with 
                respect to a long-term care policy.
                    ``(B) Undue pressure.--Employing any method of 
                marketing having the effect of, or intending to, induce 
                the purchase of long-term care policy through force, 
                fright, threat or undue pressure, whether explicit or 
                implicit.
                    ``(C) Misleading marketing.--Making use directly or 
                indirectly of any method of marketing which fails to 
                disclose in a conspicuous manner that a purpose of the 
                method of marketing is solicitation of insurance and 
                that contact will be made by an insurance agent or 
                insurance company.
                    ``(D) Others.--Engaging in such other practices 
                determined inappropriate under the reform standards.
    ``(b) Financial Needs Standards.--The reform standards shall 
include minimum financial needs standards (including both income and 
asset criteria) for the purpose of advising individuals as to the costs 
and amounts of insurance needed when considering the purchase of a 
long-term care policy.
    ``(c) Prohibition of Sale or Issuance to Medicaid Beneficiaries.--A 
carrier may not knowingly sell or issue a long-term care policy to an 
individual who is eligible for medical assistance under title XIX.
    ``(d) Prohibition of Sale or Issuance of Duplicate Service-Benefit 
Policies.--A carrier may not sell or issue a service-benefit long-term 
care policy to an individual--
            ``(1) knowing that the policy provides for coverage that 
        duplicates coverage already provided in another service-benefit 
        long-term care policy held by such individual (unless the 
        policy is intended to replace such other policy); or
            ``(2) for the benefit of an individual unless the 
        individual (or a representative of the individual) provides a 
        written statement to the effect that the coverage--
                    ``(A) does not duplicate other coverage in effect 
                under a service-benefit long-term care policy; or
                    ``(B) will replace another service-benefit long-
                term care policy.
In this subsection, the term `service-benefit long-term care policy' 
means a long-term care policy which provides for benefits based on the 
type and amount of services furnished.
    ``(e) Prohibition Based on Eligibility for Other Benefits.--A 
carrier may not sell or issue a long-term care policy that reduces, 
limits, or coordinates the benefits provided under the policy on the 
basis that the policyholder has or is eligible for other long-term care 
coverage or benefits.
    ``(f) Provision of Outline of Coverage.--No carrier may sell or 
offer for sale a long-term care policy without providing to every 
individual purchaser or potential purchaser (or representative) an 
outline of coverage that complies with the reform standards.
    ``(g) Agent Training and Certification Requirements.--The reform 
standards shall include requirements for long-term care insurance agent 
training and certification that--
            ``(1) specify requirements for training insurance agents 
        who desire to sell or offer for sale long-term care policies; 
        and
            ``(2) specify procedures for certifying and recertifying 
        agents who have completed such training and who are qualified 
        to sell or offer for sale long-term care policies.

``SEC. 21152. ADDITIONAL RESPONSIBILITIES FOR CARRIERS.

    ``(a) Refund of Premiums.--If an application for a long-term care 
policy (or for a certificate under a group long-term care policy) is 
denied or an applicant returns a policy or certificate within 30 days 
of the date of its issuance pursuant to subsection 21156, the carrier 
shall, not later than 30 days after the date of the denial or return, 
refund directly to the applicant, or in the case of an employer to 
whomever remits the premium, any premiums paid with respect to such a 
policy (or certificate). Any such refund shall not be made by delivery 
by the carrier.
    ``(b) Mailing of Policy.--If an application for a long-term care 
policy (or for a certificate under a group long-term care policy) is 
approved, the carrier shall provide each individual applicant the 
policy (or certificate) of insurance and outline of coverage not later 
than 30 days after the date of the approval.
    ``(c) Information on Denials of Claims.--If a claim under a long-
term care policy is denied, the carrier shall, within 15 days of the 
date of a written request by the policyholder or certificate holder (or 
representative)--
            ``(1) provide a written explanation of the reasons for the 
        denial;
            ``(2) make available all medical and patient records 
        directly relating to such denial; and
            ``(3) provide a written explanation of the manner in which 
        to appeal the denial.
Except as provided in subsection (e) of section 21154, no claim under 
such a policy may be denied on the basis of a failure to disclose a 
condition at the time of issuance of the policy if the application for 
the policy failed to request information respecting the condition.
    ``(d) Reporting of Information.--A carrier that issues one or more 
long-term care policies shall periodically (not less often than 
annually) report, in a form and in a manner specified by the reform 
standards, to the appropriate certifying authority for the State in 
which the policy is delivered, and shall make available to the 
Secretary, upon request, information in a form and manner so specified 
concerning--
            ``(1) the long-term care policies of the carrier that are 
        in force;
            ``(2) the most recent premiums for such policies and the 
        premiums imposed for such policies since the initial issuance 
        of such policies;
            ``(3) the lapse rate, replacement rate, and rescission 
        rates by policy; and
            ``(4) the claims denied (expressed as a number and as a 
        percentage of claims submitted) by policy.
For purposes of paragraph (3), there shall be included (but reported 
separately) data concerning lapses due to the death of the 
policyholder. For purposes of paragraph (4), there shall not be 
included as a claim any claim that is denied solely because of the 
failure to meet a deductible, waiting period, or exclusionary period.
    ``(e) Standards on Compensation for Sale of Policies.--
            ``(1) In general.--Until the Secretary, in consultation 
        with the NAIC, promulgates mandatory standards concerning 
        compensation for the sale of long-term care policies, a carrier 
        that issues one or more long-term care policies may provide a 
        commission or other compensation to an agent or other 
        representative for the sale of such a policy only if the first 
        year commission or other first year compensation to be paid 
        does not exceed the greater of--
                    ``(A) 200 percent of the commission or other 
                compensation paid for selling or servicing the policy 
                in the second year, or
                    ``(B) 50 percent of the premium paid on the first 
                year policy.
            ``(2) Subsequent years.--The commission or other 
        compensation provided for the sale of long-term care policies 
        to an individual during each of the years during the 5-year 
        period subsequent to the first year of the policy shall be the 
        same as that provided in the second subsequent year.
            ``(3) Limitation.--No carrier shall provide compensation to 
        its agents for the sale of a long-term care policy which 
        replaces an existing policy, and no agent shall receive 
        compensation for such sale greater than the renewal 
        compensation payable by the replacing carrier on renewal 
        policies.
            ``(4) Compensation defined.--As used in this subsection, 
        the term `compensation' includes pecuniary or nonpecuniary 
        remuneration of any kind relating to the sale or renewal of the 
        policy, including, but not limited to, deferred compensation, 
        bonuses, gifts, prizes, awards, and finders' fees.

``SEC. 21153. RENEWAL STANDARDS FOR ISSUANCE, AND BASIS FOR 
              CANCELLATION OF POLICIES.

    ``(a) In General.--No long-term care policy may be canceled or 
nonrenewed for any reason other than nonpayment of premium, material 
misrepresentation, or fraud.
    ``(b) Continuation and Conversion Rights for Group Policies.--
            ``(1) In general.--Each group long-term care policy shall 
        provide covered individuals with a basis for continuation or 
        conversion in accordance with this subsection.
            ``(2) Basis for continuation.--For purposes of paragraph 
        (1), a policy provides a basis for continuation of coverage if 
        the policy maintains coverage under the existing group policy 
        when such coverage would otherwise terminate and which is 
        subject only to the continued timely payment of premiums when 
        due. A group policy which restricts provision of benefits and 
        services to, or contains incentives to use certain providers or 
        facility, may provide continuation benefits which are 
        substantially equivalent to the benefits of the existing group 
        policy.
            ``(3) Basis for conversion.--For purposes of paragraph (1), 
        a policy provides a basis for conversion of coverage if the 
        policy entitles each individual--
                    ``(A) whose coverage under the group policy would 
                otherwise be terminated for any reason; and
                    ``(B) who has been continuously insured under the 
                policy (or group policy which was replaced) for at 
                least 6 months before the date of the termination;
        to issuance of a policy providing benefits not less than, 
        substantially equivalent to, or in excess of, those of the 
        policy being terminated, without evidence of insurability.
            ``(4) Treatment of substantial equivalence.--In determining 
        under this subsection whether benefits are substantially 
        equivalent, consideration should be given to the difference 
        between managed care and non-managed care plans.
            ``(5) Group replacement of policies.--If a group long-term 
        care policy is replaced by another long-term care policy 
        purchased by the same policyholder, the succeeding issuer shall 
        offer coverage to all persons covered under the old group 
        policy on its date of termination. Coverage under the new group 
        policy shall not result in any exclusion for preexisting 
        conditions that would have been covered under the group policy 
        being replaced.
    ``(c) Standards for Issuance.--
            ``(1) In general.--
                    ``(A) Guarantee.--A carrier that sells or issues 
                long-term care policies shall guarantee that such 
                policies shall be sold or issued to an individual, or 
                eligible individual in the case of a group plan, if 
                such individual meets the minimum medical underwriting 
                requirements of such policy.
                    ``(B) Premium for converted policy.--If the group 
                policy from which conversion is made replaced previous 
                group coverage, the premium for the converted policy 
                shall be calculated on the basis of the insured's age 
                at inception of coverage under the group policy.
            ``(2) Upgrade for current policies.--The reform standards 
        shall specify standards, including those providing guidance on 
        medical underwriting and age rating, with respect to the access 
        of individuals to policies offering upgraded benefits.
            ``(3) Rate stabilization.--The reform standards shall 
        specify standards for premium rate stabilization.
    ``(d) Effect of Incapacitation.--
            ``(1) In general.--
                    ``(A) Prohibition.--Except as provided in paragraph 
                (2), a long-term care policy in effect as of the 
                effective date of the reform standards may not be 
                canceled for nonpayment if the policy holder is 
                determined by a long-term care provider, physician or 
                other health care provider (independent of the issuer 
                of the policy), to be cognitively or mentally 
                incapacitated so as to not make payments in a timely 
                manner.
                    ``(B) Reinstatement.--A long-term care policy shall 
                include a provision that provides for the reinstatement 
                of such coverage, in the event of lapse, if the carrier 
                is provided with proof of cognitive or mental 
                incapacitation. Such reinstatement option shall remain 
                available for a period of not less than 5 months after 
                termination and shall allow for the collection of past 
                due premium.
            ``(2) Permitted cancellation.--A long-term care policy may 
        be canceled under paragraph (1) for nonpayment if--
                    ``(A) the period of such nonpayment is in excess of 
                30 days; and
                    ``(B) notice of intent to cancel is provided to the 
                policyholder or designated representative of the policy 
                holder not less than 30 days prior to such 
                cancellation, except that notice may not be provided 
                until the expiration of 30 days after a premium is due 
                and unpaid.
        Notice under this paragraph shall be deemed to have been given 
        as of 5 days after the mailing date.

``SEC. 21154. BENEFIT STANDARDS.

    ``(a) Use of Standard Definitions and Terminology, Uniform Format, 
and Standard Benefits.--Pursuant to the reform standards, each long-
term care policy shall, with respect to services, providers or 
facilities--
            ``(1) use uniform language and definitions, except that 
        such language and definitions may take into account the 
        differences between States with respect to definitions and 
        terminology used for long-term care services and providers; and
            ``(2) use a uniform format for presenting the outline of 
        coverage under such a policy.
    ``(b) Disclosure.--
            ``(1) Outline of coverage.--
                    ``(A) Requirement.--Each carrier that sells or 
                offers for sale a long-term care policy shall provide 
                in a uniform format an outline of coverage to each 
                individual policyholder under such policy that meets 
                the reform standards and complies with the requirements 
                of subparagraph (B).
                    ``(B) Contents.--The outline of coverage for each 
                long-term care policy shall substantially and 
                accurately reflect the contents of the policy or the 
                master policy and shall include at least the following:
                            ``(i) A description of the benefits and 
                        coverage under the policy.
                            ``(ii) A statement of the exclusions, 
                        reductions, and limitations contained in the 
                        policy.
                            ``(iii) A statement of the terms under 
                        which the policy (or certificate) may be 
                        continued in force or discontinued, the terms 
                        for continuation or conversion, and any 
                        reservation in the policy of a right to change 
                        premiums.
                            ``(iv) Consumer protection information, 
                        including the manner in which to file a claim 
                        and to register complaints.
                            ``(v) A statement, in bold face type on the 
                        face of the document in language that is 
                        understandable to an average individual, that 
                        the outline of coverage is a summary only and 
                        not a contract of insurance, and that the 
                        policy (or master policy) contains the 
                        contractual provisions that govern.
                            ``(vi) A description of the terms, 
                        specified in section 21156, under which a 
                        policy or certificate may be returned and 
                        premium refunded.
                            ``(vii) Information on--
                                    ``(I) national average costs for 
                                nursing facility and home health care 
                                and information (in graph form) on the 
                                relationship of the value of the 
                                benefits provided under the policy to 
                                such national average costs and State 
                                average costs; and
                                    ``(II) other public and private 
                                long-term care products and long-term 
                                care programs made available by the 
                                Federal Government or by a State 
                                government.
                            ``(viii) A statement of the percentage 
                        limit on annual premium increases that is 
                        provided under the policy pursuant to this 
                        section.
            ``(2) Certificates.--A certificate issued pursuant to a 
        group long-term care policy shall include--
                    ``(A) a description of the principal benefits and 
                coverage provided in the policy;
                    ``(B) a statement of the principal exclusions, 
                reductions, and limitations contained in the policy; 
                and
                    ``(C) a statement that the group master policy 
                determines governing contractual provisions.
            ``(3) Long-term care as part of life insurance.--In the 
        case of a long-term care policy issued as a part of, or a rider 
        on, a life insurance policy, at the time of policy delivery 
        there shall be provided a policy summary that includes--
                    ``(A) an explanation of how the long-term care 
                benefits interact with other components of the policy 
                (including deductions from death benefits);
                    ``(B) an illustration of the amount of benefits, 
                the length of benefits, and the guaranteed lifetime 
                benefits (if any) for each covered person; and
                    ``(C) any exclusions, reductions, and limitations 
                on benefits of long-term care.
    ``(c) Limiting Conditions on Benefits; Minimum Benefits.--
            ``(1) In general.--A long-term care policy may not 
        condition or limit eligibility--
                    ``(A) for benefits for a type of services to the 
                need for or receipt of any other services;
                    ``(B) for any benefit on the medical necessity for 
                such benefit;
                    ``(C) for benefits furnished by licensed or 
                certified providers in compliance with conditions which 
                are in addition to those required for licensure or 
                certification under State law, or if no State licensure 
                or certification laws exists, to those developed by the 
                Secretary, in consultation with the NAIC; or
                    ``(D) for residential care (if covered under the 
                policy) only--
                            ``(i) to care provided in facilities which 
                        provide a higher level of care; or
                            ``(ii) to care provided in facilities which 
                        provide for 24-hour or other nursing care not 
                        required in order to be licensed by the State.
            ``(2) Home health care or community-based services.--If a 
        long-term care policy provides benefits for the payment of 
        specified home health care or community-based services, the 
        policy--
                    ``(A) may not limit such benefits to services 
                provided by registered nurses or licensed practical 
                nurses;
                    ``(B) may not require benefits for such services to 
                be provided by a nurse or therapist that can be 
                provided by a home health aide or a home care worker 
                who is licensed or certified;
                    ``(C) may not limit such benefits to services 
                provided by agencies or providers certified under title 
                XVIII of the Social Security Act; and
                    ``(D) shall provide, at a minimum, benefits for 
                personal care services (including home health aide) and 
                adult day care.
            ``(3) Nursing facility services.--If a long-term care 
        policy provides benefits for the payment of specified nursing 
        facility services, the policy shall provide such benefits with 
        respect to all nursing facilities in the State. Except as 
        provided in the reform standards establishing uniform language 
        and definitions under section 21154(a)(1)), the term `nursing 
        facilities' has the meaning given such term by section 1919(a).
            ``(4) Per diem policies.--
                    ``(A) Definition.--For purposes of this part, the 
                term `per diem long-term care policy' means a long-term 
                care policy (or certificate under a group long-term 
                care policy) that provides for benefit payments on a 
                periodic basis due to cognitive impairment or loss of 
                functional capacity without regard to the expenses 
                incurred or services rendered during the period to 
                which the payments relate.
                    ``(B) Limitation.--No per diem long-term care 
                policy (or certificate) may condition, limit or 
                otherwise exclude benefit payments based on the receipt 
                of any type services from any type providers of long-
                term care service providers.
    ``(d) Prohibition of Discrimination.--A long-term care policy may 
not, with respect to benefits under the policy, treat an individual 
with Alzheimer's disease, with any related progressive degenerative 
dementia of an organic origin, with any organic or inorganic mental 
illness, or with mental retardation or any other cognitive or mental 
impairment, differently from an individual having a functional 
impairment for which such benefits may be made available.
    ``(e) Limitation on Use of Preexisting Condition Limits.--
            ``(1) Initial issuance.--
                    ``(A) In general.--Subject to subparagraph (B), a 
                long-term care policy may not exclude or condition 
                benefits based on a medical condition for which the 
                policyholder received treatment or was otherwise 
                diagnosed before the issuance of the policy.
                    ``(B) 6-month limit.--A long-term care policy or 
                certificate issued under this part may impose a 
                limitation or exclusion of benefits relating to 
                treatment of a condition based on the fact that the 
                condition preexisted the effective date of the policy 
                or certificate with respect to an individual if--
                            ``(i) a condition that was diagnosed or 
                        treated during the 6-month period ending on the 
                        day before the first date of coverage under the 
                        policy or certificate; and
                            ``(ii) the limitation or exclusion extends 
                        for a period not more than 6 months after the 
                        date of coverage under the policy or 
                        certificate.
            ``(2) Replacement policies.--If a long-term care policy 
        replaces another long-term care policy, the issuer of the 
        replacing policy shall waive any time periods applicable to 
        preexisting conditions, waiting periods, elimination periods, 
        and probationary periods in the new policy for similar benefits 
        to the extent such time was spent under the original policy.
    ``(f) Eligibility for Benefits.--
            ``(1) Long-term care policies.--Each long-term care policy 
        shall--
                    ``(A) describe the level of benefits available 
                under the policy; and
                    ``(B) specify in clear, understandable terms, the 
                level (or levels) of physical, cognitive, or mental 
                impairment required in order to receive benefits under 
                the policy.
            ``(2) Functional assessment.--In order to be determined 
        eligible for benefits under any long-term care policy, each 
        claimant shall have a professional functional assessment of the 
        claimant's functional or cognitive abilities. Such initial 
        assessment shall be conducted by an individual or entity, 
        meeting the qualifications established by the Secretary. The 
        individual or entity conducting such assessment may not 
        control, or be controlled by, the issuer of the policy.
            ``(3) Claims review.--Except as provided in paragraph (4), 
        each long-term care policy shall be subject to final claims 
        review by the carrier pursuant to the terms of the long-term 
        care policy.
            ``(4) Appeals process.--
                    ``(A) In general.--Each long-term care policy shall 
                provide for a timely and independent appeals process, 
                meeting the requirements of sections 21802 through 
                21815, for individuals who dispute the results of the 
                claims review conducted under paragraph (3) or the 
                policyholder's functional assessment conducted under 
                paragraph (2).
                    ``(B) Independent assessment.--An appeals process 
                under this paragraph shall include, at the request of 
                the claimant, an independent assessment of the 
                claimant's functional or cognitive abilities.
                    ``(C) Conduct.--An independent assessment under 
                subparagraph (B) shall be conducted by an individual or 
                entity meeting the qualifications established by the 
                Secretary to assure the professional competence and 
                credibility of such individual or entity and any 
                applicable State licensure and certification 
                requirements and may not be conducted--
                            ``(i) by an individual who has a direct or 
                        indirect significant or controlling interest 
                        in, or direct affiliation or relationship with, 
                        the issuer of the policy;
                            ``(ii) by an entity that provides services 
                        to the policyholder or certificate holder for 
                        which benefits are available under the long-
                        term care policy; or
                            ``(iii) by an individual or entity 
                        controlled by the issuer of the policy.
            ``(5) Control defined.--For purposes of paragraphs (2) and 
        (4), the term `control' means the direct or indirect possession 
        of the power to direct the management and policies of a person. 
        Control is presumed to exist if any person directly or 
        indirectly owns, controls, holds with the power to vote, or 
        holds proxies representing at least 10 percent of the voting 
        securities of another person.
    ``(g) Inflation Protection.--
            ``(1) Option to purchase.--A carrier may not offer a long-
        term care policy unless the carrier also offers to the proposed 
        policyholder, including each group policyholder, the option to 
        purchase a long-term care policy that provides for increases in 
        benefit levels, with benefit maximums or reasonable durations 
        that are meaningful, to account for reasonably anticipated 
        increases in the costs of long-term care services covered by 
        the policy. A carrier may not offer to a policyholder an 
        inflation protection feature that is less favorable to the 
        policyholder than one of the following:
                    ``(A) With respect to policies that provide for 
                automatic periodic increases in benefits, the policy 
                provides for an annual increase in benefits in a manner 
                so that such increases are computed annually at a rate 
                of not less than 5 percent.
                    ``(B) With respect to policies that provide for 
                periodic opportunities to elect an increase in 
                benefits, the policy guarantees that the insured 
                individual will have the right to periodically increase 
                the benefit levels under the policy without providing 
                evidence of insurability or health status so long as 
                the option for the previous period was not declined. 
                The amount of any such additional benefit may not be 
                less than the difference between--
                            ``(i) the existing policy benefit; and
                            ``(ii) such existing benefit compounded 
                        annually at a rate of at least 5 percent for 
                        the period beginning on the date on which the 
                        existing benefit is purchased and extending 
                        until the year in which the offer of increase 
                        is made.
                    ``(C) With respect to service-benefit long-term 
                care policies, the policy covers a specified percentage 
                of the actual or reasonable charges and does not 
                include a maximum specified indemnity amount or limit.
            ``(2) Exception.--The requirements of paragraph (1) shall 
        not apply to life insurance policies or riders containing 
        accelerated long-term care benefits.
            ``(3) Required information.--Carriers shall include the 
        following information in or together with the outline of 
        coverage provided under this part:
                    ``(A) A comparison (shown as a graph) of the 
                benefit levels of a policy that increases benefits over 
                the policy period with a policy that does not increase 
                benefits. Such comparison shall show benefit levels 
                over not less than a 20-year period.
                    ``(B) Any expected premium increases or additional 
                premiums required to pay for any automatic or optional 
                benefit increases, whether the individual who purchases 
                the policy obtains the inflation protection initially 
                or whether such individual delays purchasing such 
                protection until a future time.
            ``(4) Continuation of protection.--Benefit increases under 
        a policy described in paragraph (1) shall continue without 
        regard to an insured's age, claim status or claim history, or 
        the length of time the individual has been insured under the 
        policy.
            ``(5) Constant premium.--A policy described in paragraph 
        (1) that provides for automatic benefit increases shall include 
        an offer of a premium that the carrier expects to remain 
        constant. Such offer shall disclose in a conspicuous manner 
        that the premium may change in the future unless the premium is 
        guaranteed to remain constant.
            ``(6) Rejection.--Inflation protection under this 
        subsection shall be included in a long-term care policy unless 
        a carrier obtains a written rejection of such protection signed 
        by the policyholder.

``SEC. 21155. NONFORFEITURE.

    ``(a) In General.--Each long-term care policy (or certificate) 
shall provide that if the policy lapses after the policy has been in 
effect for a minimum period as specified under the reform standards, 
the policy will provide, without payment of any additional premiums, 
nonforfeiture benefits as determined appropriate by such standards.
    ``(b) Establishment of Standards.--The reform standards shall 
provide that the percentage or amount of benefits under subsection (a) 
shall increase based upon the policyholder's equity in the policy.

``SEC. 21156. LIMIT OF PERIOD OF CONTESTABILITY AND RIGHT TO RETURN.

    ``(a) Contestability.--A carrier may not cancel or renew a long-
term care policy or deny a claim under the policy based on fraud or 
intentional misrepresentation relating to the issuance of the policy 
unless notice of such fraud or misrepresentation is provided within a 
time period to be determined by the reform standards.
    ``(b) Right To Return.--Each applicant for a long-term care policy 
shall have the right to return the policy (or certificates) within 30 
days of the date of its delivery (and to have the premium refunded) if, 
after examination of the policy or certificate, the applicant is not 
satisfied for any reason.

``SEC. 21157. CIVIL MONEY PENALTY AND PRIVATE ACTIONS.

    ``(a) Carrier.--Any carrier that sells, or offers for sale, or 
issues a long-term care policy and that--
            ``(1) violates any sales practice under section 21151;
            ``(2) fails to make a refund in accordance with section 
        21152(a);
            ``(3) fails to transmit a policy in accordance with section 
        21152(b);
            ``(4) provides a commission or compensation in violation of 
        section 21152(e);
            ``(5) fails to provide an outline of coverage in violation 
        of section 21154(b)(1); or
            ``(6) issues a policy without obtaining certain information 
        in violation of section 21154(f);
is subject to a civil money penalty of not to exceed $25,000 for each 
such violation.
    ``(b) Agents.--Any agent that sells or offers for sale a long-term 
care policy and that--
            ``(1) violates any sales practice under section 21151;
            ``(2) fails to make a refund in accordance with section 
        21152(a);
            ``(3) fails to transmit a policy in accordance with section 
        21152(b);
            ``(4) fails to provide an outline of coverage in violation 
        of section 21154(b)(1); or
            ``(5) issues a policy without obtaining certain information 
        in violation of section 21154(f);
is subject to a civil money penalty of not to exceed $15,000 for each 
such violation.
    ``(c) Effect on State Law.--Nothing in this section shall be 
construed as preempting or otherwise limiting stricter penalties that 
may be imposed by a State for the types of conduct described in this 
section.
    ``(d) Private Actions.--An individual may commence a civil action 
in an appropriate State or United States district court to enforce the 
provisions of this title with respect to long-term care policies and 
may be awarded appropriate relief and reasonable attorney's fees.

``SEC. 21158. LONG-TERM CARE POLICY DEFINED.

    ``(a) In General.--As used in this part, the term `long-term care 
policy' means any insurance policy, rider, or certificate advertised, 
marketed, offered, or designed to provide coverage for not less than 12 
consecutive months for each covered person on an expense incurred, 
indemnity prepaid or other basis, for one or more necessary diagnostic, 
preventive, therapeutic, rehabilitative, maintenance or personal care 
services, provided in a setting other than an acute care unit of a 
hospital. Such term includes--
            ``(1) group and individual annuities and life insurance 
        policies, riders, or certificates that provide directly, or 
        that supplement, long-term care insurance; and
            ``(2) a policy, rider, or certificates that provides for 
        payment of benefits based on cognitive impairment or the loss 
        of functional capacity.
    ``(b) Issuance.--
            ``(1) In general.--Long-term care policies may be issued by 
        any carrier.
            ``(2) Carrier.--As used in this part, the term `carrier' 
        means--
                    ``(A) an insurer;
                    ``(B) a fraternal benefit society;
                    ``(C) a nonprofit health, hospital, or medical 
                service corporation;
                    ``(D) a prepaid health plan;
                    ``(E) a health maintenance organization; or
                    ``(F) any similar organization to the extent such 
                organization is otherwise authorized to issue life or 
                health insurance.
    ``(c) Policies Excluded.--The term `long-term care policy' shall 
not include any insurance policy, rider, or certificate that is offered 
primarily to provide basic medicare supplement coverage, basic hospital 
expense coverage, basic medical-surgical expense coverage, hospital 
confinement indemnity coverage, major medical expense coverage, 
disability income or related asset-protection coverage, accident only 
coverage, specified disease or specified accident coverage, or limited 
benefit health coverage. With respect to life insurance, such term 
shall not include life insurance policies, riders, or certificates--
            ``(1) that accelerate the death benefit specifically for 
        one or more of the qualifying events of terminal illness, 
        medical conditions requiring extraordinary medical 
        intervention, or permanent institutional confinement,
            ``(2) that provide the option of a lump-sum payment for 
        those benefits, or
            ``(3) with respect to which neither the benefits nor the 
        eligibility for the benefits is conditioned upon the receipt of 
        long-term care.
    ``(d) Applications.--Notwithstanding any other provision of this 
part, this part shall apply to any product advertised, marketed, or 
offered as a long-term insurance policy, rider or certificate.

                ``Subtitle C--Benefits and Cost-Sharing

                  ``PART I--STANDARD BENEFITS PACKAGES

``SEC. 21201. GENERAL DESCRIPTION OF STANDARD BENEFITS PACKAGES.

    ``(a) Standard Benefits Package.--For purposes of this title, a 
standard benefits package is a benefits package that--
            ``(1)(A) provides all of the items and services under the 
        categories of health care items and services described in 
        section 21202 as determined by the Board under section 
        21213(b)(4); and
            ``(B) provides for a cost-sharing schedule described in 
        section 21203(a)(1); and
            ``(2) has an actuarial value that is equivalent to the 
        actuarial value of the benefits package provided by the Blue 
        Cross/Blue Shield Standard Option under the Federal Employees 
        Health Benefits Program, adjusted for an average population and 
        adjusted for the particular cost-sharing schedule provided for 
        in the package (as determined by the National Health Benefits 
        Board established under section 21211 (referred to in this part 
        as the `Board')).
    ``(b) Alternative Standard Benefits Package.--For purposes of this 
title, an alternative standard benefits package is a benefits package 
that--
            ``(1)(A) provides such items and services under the 
        categories of health care items and services described in 
        section 21202 as determined by the Board under section 
        21213(b)(5); and
                    ``(B) the cost-sharing schedule described in 
                section 21203(a)(2); and
            ``(2) has an actuarial value that is less than the 
        actuarial value of the benefits package provided by the Blue 
        Cross/Blue Shield Standard Option under the Federal Employees 
        Health Benefits Program, adjusted for an average population (as 
        determined by the Board).

``SEC. 21202. DESCRIPTION OF CATEGORIES OF ITEMS AND SERVICES.

    ``(a) In General.--The categories of health care items and services 
described in this section are the following:
            ``(1) Inpatient and outpatient care, including hospital and 
        health professional services (as defined in subsection (c)).
            ``(2) Emergency services, including appropriate transport 
        services.
            ``(3) Clinical preventive services, including services for 
        high risk populations, immunizations, tests, and clinician 
        visits.
            ``(4) Mental illness and substance abuse services.
            ``(5) Family planning services and services for pregnant 
        women.
            ``(6) Prescription drugs and biologicals.
            ``(7) Hospice care services.
            ``(8) Home health care services.
            ``(9) Outpatient laboratory, radiology, and diagnostic 
        services and medical equipment.
            ``(10) Outpatient rehabilitation services.
            ``(11) Vision care, dental care, and hearing aids for 
        individuals under 22 years of age.
            ``(12) Patient care costs associated with investigational 
        treatments (excluding the direct costs of an investigational 
        treatment) that are part of a peer-reviewed and approved 
        research program (as defined by the Secretary) or research 
        trials approved by the Secretary, the Directors of the National 
        Institutes of Health, the Commissioner of the Food and Drug 
        Administration, the Secretary of Veterans Affairs, the 
        Secretary of Defense, or a qualified nongovernmental research 
        entity as defined in guidelines of the National Institutes of 
        Health, including guidelines for cancer center support grants 
        designated by the National Cancer Institute.
    ``(b) Limitation.--
            ``(1) In general.--Items and services under the categories 
        described in subsection (a) shall be furnished to health plan 
        enrollees only when medically necessary or appropriate.
            ``(2) Clinical preventive services.--For purposes of 
        paragraph (1), any clinical preventive service furnished in 
        accordance with a periodicity schedule established by the Board 
        under section 21213(b)(2)(B) shall be medically necessary or 
        appropriate.
            ``(3) Emergency services.--For purposes of paragraph (1), 
        any emergency service furnished to an individual with an 
        emergency medical condition (as defined in section 1867(e)(1)) 
        shall be medically necessary or appropriate.
    ``(c) Definition of Health Professional Services.--For purposes of 
this subtitle, the term `health professional services' means 
professional services that are lawfully provided by a physician or 
another health professional who is legally authorized to provide such 
services in the State in which the services are provided.
    ``(d) Definition of Medically Necessary or Appropriate.--For 
purposes of this subtitle, an item or service is medically necessary or 
appropriate--
            ``(1) with respect to an enrollee who is 22 years of age or 
        older, if the item or service is--
                    ``(A) for the treatment or diagnosis of a health 
                condition;
                    ``(B) generally regarded as being safe and 
                effective;
                    ``(C) indicated for the enrollee; and
                    ``(D) intended to maintain or improve the 
                biological, psychological, or functional condition of 
                the enrollee or to prevent or mitigate an adverse 
                health outcome or limitation in functional capacity for 
                the enrollee; and
            ``(2) with respect to an enrollee under 22 years of age, if 
        the item or service--
                    ``(A) is appropriate for the age and health status 
                of the enrollee;
                    ``(B) will prevent or ameliorate the effects of a 
                condition, illness, injury, or disorder;
                    ``(C) will aid the overall physical and mental 
                growth and development of the enrollee; or
                    ``(D) will assist in achieving or maintaining 
                maximum functional capacity in performing daily 
                activities.

``SEC. 21203. COST-SHARING.

    ``(a) In General.--
            ``(1) Standard benefits package.--Except as provided in 
        paragraph (3), each standard benefits package shall include a 
        cost-sharing schedule developed by the Board for such package 
        under section 21213(c).
            ``(2) Alternative standard benefits package.--Except as 
        provided in paragraph (3), each alternative standard benefits 
        package shall include the cost-sharing schedule developed by 
        the Board for such package under section 21213(c).
            ``(3) Increases in out-of-pocket limits based on health 
        spending.--In the case of any calendar year for which an 
        increase in the out-of-pocket limits under any cost-sharing 
        schedule developed by the Board for a benefits package is 
        required under section 801 of the Health Security Act, the out-
        of-pocket limits under such schedule shall be as specified in 
        the Executive Order issued pursuant to section 801(d) of such 
        Act.
    ``(b) Deductibles, Cost-Sharing, and Out-of-Pocket Limits on Cost-
Sharing.--
            ``(1) Application on an annual basis.--The deductibles and 
        out-of-pocket limits on cost-sharing for a year under the 
        schedules referred to in subsection (a) shall be applied based 
        upon expenses incurred for items and services furnished in the 
        year.
            ``(2) Individual and family general deductibles.--
                    ``(A) Individual.--Subject to subparagraph (B), 
                with respect to an individual enrolled under a health 
                plan (regardless of the class of enrollment), any 
                individual general deductible in the cost-sharing 
                schedule offered by the plan represents the amount of 
                countable expenses (as defined in subparagraph (C)) 
                that the individual may be required to incur in a year 
                before the plan incurs liability for expenses for such 
                items and services furnished to the individual.
                    ``(B) Family.--In the case of an individual 
                enrolled under a health plan under a family class of 
                enrollment (as defined in section 
                21113(b)(2)(B)(iii)(I)), the individual general 
                deductible under subparagraph (A) shall not apply to 
                countable expenses incurred by the individual or any 
                member of the individual's family in a year at such 
                time as the family has incurred, in the aggregate, 
                countable expenses in the amount of the family general 
                deductible for the year.
                    ``(C) Countable expense.--In this paragraph, the 
                term `countable expense' means, with respect to an 
                individual for a year, an expense for an item or 
                service covered by the standard benefit package that is 
                subject to the general deductible and for which, but 
                for such deductible and any other cost-sharing under 
                this subtitle, a health plan is liable for payment. The 
                amount of countable expenses for an individual for a 
                year under this paragraph shall not exceed the 
                individual general deductible for the year.
            ``(3) Coinsurance and copayments.--After a general or 
        separate deductible that applies to an item or service covered 
        by the standard benefit package has been satisfied for a year, 
        subject to paragraph (4), coinsurance and copayments are 
        amounts (expressed as a percentage of an amount otherwise 
        payable or as a dollar amount, respectively) that an individual 
        may be required to pay with respect to the item or service.
            ``(4) Individual and family limits on cost-sharing.--
                    ``(A) Individual.--Subject to subparagraph (B), 
                with respect to an individual enrolled under a health 
                plan (regardless of the class of enrollment), the 
                individual out-of-pocket limit on cost-sharing in the 
                cost-sharing schedule offered by the plan represents 
                the amount of expenses that the individual may be 
                required to incur under the plan in a year because of a 
                general deductible, separate deductibles, copayments, 
                and coinsurance before the plan may no longer impose 
                any cost-sharing with respect to items or services 
                covered by the standard benefit package that are 
                provided to the individual.
                    ``(B) Family.--In the case of an individual 
                enrolled under a health plan under a family class of 
                enrollment (as defined in section 
                21113(b)(2)(B)(iii)(I)), the family out-of-pocket limit 
                on cost-sharing in the cost-sharing schedule offered by 
                the plan represents the amount of expenses that members 
                of the individual's family, in the aggregate, may be 
                required to incur under the plan in a year because of a 
                general deductible, separate deductibles, copayments, 
                and coinsurance before the plan may no longer impose 
                any cost-sharing with respect to items or services 
                covered by the standard benefit package that are 
                provided to any member of the individual's family.

               ``PART II--NATIONAL HEALTH BENEFITS BOARD

``SEC. 21211. CREATION OF NATIONAL HEALTH BENEFITS BOARD; MEMBERSHIP.

    ``(a) In General.--There is hereby established in the Department of 
Health and Human Services a National Health Benefits Board.
    ``(b) Composition.--The Board is composed of 7 members appointed by 
the President, by and with the advice and consent of the Senate. No 
more than 4 members of the Board may be affiliated with the same 
political party. Members shall be appointed not later than 90 days 
after the date of the enactment of this title.
    ``(c) Chair.--The President shall designate one of the members of 
the Board as chair.
    ``(d) Terms.--
            ``(1) In general.--Except as provided in paragraph (2), the 
        term of each member of the Board is 6 years and begins when the 
        term of the predecessor of that member ends.
            ``(2) Initial terms.--The initial terms of the members of 
        the Board first taking office after the date of the enactment 
        of this title, shall expire as designated by the President, two 
        at the end of two years, two at the end of four years, and 
        three at the end of six years.
            ``(3) Continuation in office.--Upon the expiration of a 
        term of office, a member shall continue to serve until a 
        successor is appointed and qualified.
    ``(e) Vacancies.--
            ``(1) In general.--If a vacancy occurs, other than by 
        expiration of term, a successor shall be appointed by the 
        President, by and with the consent of the Senate, to fill such 
        vacancy. The appointment shall be for the remainder of the term 
        of the predecessor.
            ``(2) No impairment of function.--A vacancy in the 
        membership of the Board does not impair the authority of the 
        remaining members to exercise all of the powers of the Board.
            ``(3) Acting chair.--The Board may designate a member to 
        act as chair during any period in which there is no chair 
        designated by the President.
    ``(f) Meetings; Quorum.--
            ``(1) Meetings.--The chair shall preside at meetings of the 
        Board, and in the absence of the chair, the Board shall elect a 
        member to act as chair pro tempore.
            ``(2) Quorum.--Four members of the Board shall constitute a 
        quorum thereof.

``SEC. 21212. QUALIFICATIONS OF BOARD MEMBERS.

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

``SEC. 21213. GENERAL DUTIES AND RESPONSIBILITIES.

    ``(a) Criteria for Determining Medical Necessity or 
Appropriateness.--The Board shall define the standards to be used by a 
health plan in determining whether an item or service under the 
categories of health care items and services described in section 21202 
is medically necessary or appropriate for an enrollee in the plan.
    ``(b) Clarification and Refinement of Items and Services.--
            ``(1) In general.--The Board shall promulgate such 
        regulations or establish such guidelines as may be necessary to 
        clarify and refine the items and services under the categories 
        of health care items and services described in section 21202 in 
        accordance with standards of medical necessity or 
        appropriateness. In performing its duties under the preceding 
        sentence, the Board shall--
                    ``(A) develop interim coverage decisions in limited 
                circumstances;
                    ``(B) clarify and refine the items and services in 
                the categories of health care items and services in a 
                manner that prevents adverse risk selection;
                    ``(C) not specify types of providers;
                    ``(D) not specify particular procedures or 
                treatments or classes of procedures or treatments; and
                    ``(E) give priority to--
                            ``(i)(I) parity for mental illness and 
                        substance abuse services with other medical 
                        services using the standards of medical 
                        necessity or appropriateness for the enrollee 
                        receiving the services in order to ensure that 
                        arbitrary day or visit limits or cost-sharing 
                        requirements applied to mental illness and 
                        substance abuse services that are not different 
                        from those applied to medical health services, 
                        and
                            ``(II) encouraging the use of outpatient 
                        treatments in delivering mental illness and 
                        substance abuse services to the greatest extent 
                        possible;
                            ``(ii) the needs of children and vulnerable 
                        populations (including rural and underserved 
                        individuals); and
                            ``(iii) improving the health of individuals 
                        through prevention.
            ``(2) Schedules for items and services.--
                    ``(A) In general.--The Board shall establish and 
                update periodicity schedules for the items and services 
                in the categories of health care items and services 
                described in section 21202.
                    ``(B) Special rule with respect to clinical 
                preventive services.--With respect to clinical 
                preventive services, the Board--
                            ``(i) shall specify and define specific 
                        items and services as clinical preventive 
                        services for high risk populations and shall 
                        establish and update a periodicity schedule for 
                        such items and services;
                            ``(ii) shall establish and update the 
                        periodicity schedules for the age-appropriate 
                        immunizations, tests, and clinician visits;
                            ``(iii) shall establish rules with respect 
                        to coverage for an immunization, test, or 
                        clinician visit that is not provided to an 
                        individual during the age range for such 
                        immunization, test, or clinician visit that is 
                        specified under clause (ii); and
                            ``(iv) may otherwise modify clinical 
                        preventive services taking into account age and 
                        other risk factors.
            ``(3) Investigational treatments.--The Board shall refine 
        policies regarding coverage of patient care costs associated 
        with investigational treatments that are part of approved 
        research trials.
            ``(4) Items and services provided by standard benefits 
        package.--The regulations promulgated by the Board under this 
        subsection shall provide that each standard benefits package 
        shall provide for the same items and services in the categories 
        of health care items and services described in section 21202, 
        as clarified and refined under this subsection, and provide for 
        such items and services in the same amount, duration, or scope.
            ``(5) Items and services provided by alternative standard 
        benefits package.--The regulations promulgated by the Board 
        under this subsection shall specify the items and services in 
        the categories of health care items and services described in 
        section 21202 that an alternative standard benefits package 
        must provide.
    ``(c) Cost-Sharing.--The Board shall establish cost-sharing 
schedules to be provided by a standard benefits package or an 
alternative standard benefits package. In establishing such cost-
sharing schedules, the Board shall meet the following requirements:
            ``(1) Annual basis.--The Board shall establish cost sharing 
        schedules on an annual basis.
            ``(2) Out-of-pocket limits.--Each cost sharing schedule 
        developed by the Board shall include out-of-pocket limits.
            ``(3) Lifetime limits.--No cost-sharing schedule 
        established by the Board may include lifetime limits.
            ``(4) Standard benefits package.--In establishing cost 
        sharing schedules for standard benefits packages, the Board 
        shall ensure that the schedules permit a variety of delivery 
        systems. A standard benefit package that provides for the cost 
        sharing schedule established by the Board under this paragraph 
        that has the lowest actuarial value relative to the actuarial 
        values of all other cost sharing schedules established by the 
        Board under this paragraph, shall have an actuarial value that 
        is equivalent to the actuarial value of the benefits package 
        provided by the Blue Cross/Blue Shield Standard Option under 
        the Federal Employees Health Benefits Program, adjusted for an 
        average population (as determined by the Board).
            ``(5) Alternative standard benefits package.--The Board 
        shall establish only one cost sharing schedule for the 
        alternative standard benefits package. Such cost sharing 
        schedule shall provide for a higher deductible than any 
        deductible under a schedule established by the Board for a 
        standard benefits package.
            ``(6) Clinical preventive services.--No cost sharing 
        schedule established by the Board may include cost sharing for 
        clinical preventive services.
            ``(7) Cost sharing rules.--The cost sharing schedules 
        developed under this subsection shall be consistent with the 
        provisions of section 21203(b).
    ``(d) Cost-Sharing Assistance.--
            ``(1) In general.--For purposes of providing cost-sharing 
        assistance under section 1953, the Board shall determine an 
        appropriate reduction in the cost-sharing applicable to cost-
        sharing subsidy eligible individuals (as defined in section 
        1953(a)(2)) under certified standard health plans.
            ``(2) Considerations.--The Board shall assure that 
        reductions in cost-sharing are determined under paragraph (1) 
        in a manner that reflects--
                    ``(A) the extent to which an individual's family 
                income is below the poverty line (as defined in section 
                1958(5)); and
                    ``(B) whether an individual may enroll in a low-
                cost-sharing plan.
    ``(e) Legislative Recommendations.--
            ``(1) In general.--The Board may submit recommendations to 
        Congress for such modifications to the provisions of this 
        subtitle as the Board determines appropriate in accordance with 
        section 21217(a)(1).
            ``(2) Consultations.--In performing its duties under this 
        subsection, the Board shall consult with the President and 
        Congress.
    ``(f) Other Requirements.--The Board shall satisfy any other 
requirements imposed on the Board under this title.

``SEC. 21214. POWERS.

    ``(a) Staff; Contract Authority.--The Board shall have authority, 
subject to the provisions of the civil-service laws and chapter 51 and 
subchapter III of chapter 53 of title 5, United States Code, to appoint 
such officers and employees as are necessary to carry out its 
functions. The Board may contract with any person (including an agency 
of the Federal Government) for studies and analysis as required to 
execute its functions. Any employee of the Executive Branch may be 
detailed to the Board to assist the Board in carrying out its duties.
    ``(b) Consultations with Experts.--The Board may consult with any 
outside expert individuals or groups that the Board determines 
appropriate in performing its duties under section 21213. The Board may 
establish advisory committees.
    ``(c) Access to Information.--The Board may secure directly from 
any department or agency of the United States information necessary to 
enable it to carry out its functions, to the extent such information is 
otherwise available to a department or agency of the United States. 
Upon request of the chair, the head of that department or agency shall 
furnish that information to the Board.
    ``(d) Delegation of Authority.--Except as otherwise provided, the 
Board may delegate any function to such officers and employees as the 
Board may designate and may authorize such successive redelegations of 
such functions with the Board as the Board deems to be necessary or 
appropriate. No delegation of functions by the Board shall relieve the 
Board of responsibility for the administration of such functions.
    ``(e) Rulemaking.--The National Health Board is authorized to 
establish such rules as may be necessary to carry out this subtitle.

``SEC. 21215. FUNDING.

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

``SEC. 21216. APPLICABILITY OF FEDERAL ADVISORY COMMITTEE ACT.

    ``The Federal Advisory Committee Act (5 U.S.C. App.) shall not 
apply to the Board.

``SEC. 21217. CONGRESSIONAL CONSIDERATION OF BOARD RECOMMENDATIONS.

    ``(a) In General.--
            ``(1) Timing for submission.--The Board shall submit any 
        recommendations to Congress under section 21213(e) by not later 
        than March 1 of any year.
            ``(2) Effectiveness.--Except as provided in subsection (c), 
        the recommendations submitted under paragraph (1) shall take 
        effect unless by September 15 of the year in which such 
        recommendations are submitted Congress enacts a joint 
        resolution disapproving such recommendations in accordance with 
        subsection (b).
    ``(b) Congressional Disapproval Procedures.--
            ``(1) Contents of resolution.--For purposes of subsection 
        (a), `joint resolution' means only a joint resolution 
        introduced after the date on which the recommendations of the 
        Board are received by Congress the matter after the resolving 
        clause of which is as follows: `That Congress disapproves the 
        recommendations of the National Health Benefits Board submitted 
        to the Congress on ____________.' (the blank space being 
        appropriately filled in).
            ``(2) Referral to committee.--A resolution described in 
        paragraph (1) introduced in the House of Representatives shall 
        be referred to the Committee on Ways and Means of the House of 
        Representatives. A resolution described in paragraph (1) 
        introduced in the Senate shall be referred to the Committee on 
        Finance of the Senate.
            ``(3) Discharge of committee.--If the committee to which is 
        referred a resolution described in paragraph (1) has not 
        reported such resolution (or an identical resolution) by July 
        1, such committee shall be deemed to be discharged from further 
        consideration of such resolution and such resolution shall be 
        placed on the appropriate calendar of the House involved.
            ``(4) Floor consideration.--
                    ``(A) In general.--When the committee to which a 
                resolution is referred has reported, or has been deemed 
                to be discharged (under paragraph (3)) from further 
                consideration of, a resolution described in paragraph 
                (1), it is at any time thereafter in order (even though 
                a previous motion to the same effect has been disagreed 
                to) for any Member of the respective House to move to 
                proceed to the consideration of the resolution, and all 
                points of order against the resolution (and against 
                consideration of the resolution) are waived. The motion 
                is highly privileged in the House of Representatives 
                and is privileged in the Senate and is not debatable. 
                The motion is not subject to amendment, or to a motion 
                to postpone, or to a motion to proceed to the 
                consideration of other business. A motion to reconsider 
                the vote by which the motion is agreed to or disagreed 
                to shall not be in order. If a motion to proceed to the 
                consideration of the resolution is agreed to, the 
                respective House shall immediately proceed to 
                consideration of the joint resolution without 
                intervening motion, order, or other business, and the 
                resolution shall remain the unfinished business of the 
                respective House until disposed of.
                    ``(B) Debate.--Debate on the resolution, and on all 
                debatable motions and appeals in connection therewith, 
                shall be limited to not more than 2 hours, which shall 
                be divided equally between those favoring and those 
                opposing the resolution. A motion further to limit 
                debate is in order and not debatable. An amendment to, 
                or a motion to postpone, or a motion to proceed to the 
                consideration of other business, or a motion to 
                recommit the resolution is not in order. A motion to 
                reconsider the vote by which the resolution is agreed 
                to or disagreed to is not in order.
                    ``(C) Vote on final passage.--Immediately following 
                the conclusion of the debate on a resolution described 
                in paragraph (1), and a single quorum call at the 
                conclusion of the debate if requested in accordance 
                with the rules of the appropriate House, the vote on 
                final passage of the resolution shall occur.
                    ``(D) Rulings of the chair on procedure.--Appeals 
                from the decisions of the Chair relating to the 
                application of the rules of the Senate or the House of 
                Representatives, as the case may be, to the procedure 
                relating to a resolution described in paragraph (1) 
                shall be decided without debate.
            ``(5) Coordination with action by other house.--
                    ``(A) In general.--If, before the passage by one 
                House of a resolution of that House described in 
                paragraph (1), that House receives from the other House 
                a resolution described in paragraph (1), then the 
                following procedures shall apply:
                            ``(i) The resolution of the other House 
                        shall not be referred to a committee except in 
                        the case of final passage as provided in clause 
                        (ii)(II).
                            ``(ii) With respect to a resolution 
                        described in paragraph (1) of the House 
                        receiving the resolution--
                                    ``(I) the procedure in that House 
                                shall be the same as if no resolution 
                                had been received from the other House; 
                                but
                                    ``(II) the vote on final passage 
                                shall be on the resolution of the other 
                                House.
                    ``(B) Disposition.--Upon disposition of the 
                resolution received from the other House, it shall no 
                longer be in order to consider the resolution that 
                originated in the receiving House.
            ``(6) Rules of house of representatives and senate.--This 
        subsection is enacted by Congress--
                    ``(A) as an exercise of the rulemaking power of the 
                Senate and House of Representatives, respectively, and 
                as such it is deemed a part of the rules of each House, 
                respectively, but applicable only with respect to the 
                procedure to be followed in that House in the case of a 
                resolution described in paragraph (1), and it 
                supersedes other rules only to the extent that it is 
                inconsistent with such rules; and
                    ``(B) with full recognition of the constitutional 
                right of either House to change the rules (so far as 
                relating to the procedure of that House) at any time, 
                in the same manner, and to the same extent as in the 
                case of any other rule of that House.
    ``(c) Recommendations in 2002.--Subsection (a)(2) shall not apply 
to any recommendations submitted to Congress by the Board during 2002.

   ``PART III--PROVISIONS RELATING TO ABORTION AND RELIGIOUS BELIEFS

``SEC. 21221. REGULATION OF ABORTION BY THE STATES.

    ``Nothing in this title shall be construed to conflict with any 
constitutionally permissible regulation of abortion by a State.

``SEC. 21222. NO REQUIREMENT TO CREATE OR MAINTAIN ABORTION CLINICS AND 
              PROVIDERS.

    ``Nothing in this title shall be construed to--
            ``(1) require the creation or maintenance of abortion 
        clinics or other abortion providers within a State or any 
        region of a State; or
            ``(2) authorize any Federal agency or State to--
                    ``(A) require the creation or maintenance of 
                abortion clinics or other abortion providers; or
                    ``(B) deny certification, or any other benefit 
                granted by this title, to a health plan based on the 
                number of, or the presence or absence of, abortion 
                clinics or other abortion providers in or affiliated 
                with the plan.

``SEC. 21223. PROVISIONS RELATING TO RELIGIOUS BELIEF OR MORAL 
              CONVICTION.

    ``Nothing in this title shall be construed to--
            ``(1) prevent any individual from purchasing a standard 
        benefits package which excludes coverage of abortion services, 
        if the individual objects to abortion on the basis of a 
        religious belief or moral conviction;
            ``(2) prevent any employer from contributing to the 
        purchase of a standard benefits package which excludes coverage 
        of abortion or other services, if the employer objects to such 
        services on the basis of a religious belief or moral 
        conviction;
            ``(3) require any health professional or health facility to 
        perform or assist in the performance of any health care 
        service, if the health professional or facility objects to 
        performing or assisting in the performance of such a service on 
        the basis of a religious belief or moral conviction; and
            ``(4) require any commercial insurance company, Blue Cross 
        plan, integrated health plan, or any other organization that 
        assumes health insurance risk to offer a package including 
        abortion or other services, if the health plan sponsor objects 
        to covering such services on the basis of a religious belief or 
        moral conviction.

             ``Subtitle D--Expanded Access to Health Plans

                   ``PART I--ACCESS THROUGH EMPLOYERS

``SEC. 21401. GENERAL EMPLOYER RESPONSIBILITIES.

    ``(a) Availability of Coverage.--
            ``(1) In general.--Each employer shall meet the requirement 
        under section 21002(c)(1)(A)(i) to make available to each 
        employee of the employer the opportunity to enroll through the 
        employer in any of the certified standard health plans 
        described in such section.
            ``(2) Waiver of access requirement.--If the Governor of a 
        participating State waives the requirement under section 
        21413(a)(2) that a purchasing cooperative offer at least 3 
        certified plans in certain rural areas of the State, any 
        employer located in such rural area shall not be required to 
        offer 3 certified standard health plans in such area.
    ``(b) Forwarding of Information.--
            ``(1) Information regarding plans.--An employer must 
        provide each employee of such employer--
                    ``(A) with information provided by the State under 
                section 21013 regarding all certified standard health 
                plans offered in the community rating area in which the 
                employer is located, and
                    ``(B) if the employer knows that an employee 
                resides in another community rating area, information 
                regarding how to obtain information on certified 
                standard health plans offered to residents of such 
                other community rating area.
            ``(2) Information regarding employees.--An employer shall 
        forward the name and address (and any other necessary 
        identifying information specified by the Secretary) of each 
        employee enrolling through the employer--
                    ``(A) to the certified standard health plan in 
                which such employee is enrolling, or
                    ``(B) to the purchasing cooperative (if any) 
                through which such employee is enrolling.
    ``(c) Payroll Deduction.--
            ``(1) In general.--If--
                    ``(A) a certified standard plan, or purchasing 
                cooperative on behalf of such a plan, requests an 
                employer under this section to withhold premiums with 
                respect to any employee enrolled in the plan, or
                    ``(B) an employee requests an employer to withhold 
                premiums to a certified standard health plan in which 
                the employee is enrolled or enrolling,
        the employer shall deduct and withhold such premiums (less any 
        employer contribution) through payroll deduction and pay the 
        amounts deducted and withheld to the plan or to the purchasing 
        cooperative.
            ``(2) Payroll deductions.--
                    ``(A) Frequency.--In the case of an employee who is 
                paid wages or other compensation--
                            ``(i) on a monthly or more frequent basis, 
                        the employer shall deduct and withhold, and 
                        pay, such premiums at the same time as the 
                        payment of such wages or other compensation, or
                            ``(ii) less frequently than monthly, the 
                        employer shall pay such premiums on a monthly 
                        basis.
                    ``(B) Employee protections.--
                            ``(i) Withholding constitutes satisfaction 
                        of obligation.--If an employee notifies the 
                        health plan sponsor that the employee has 
                        requested the employer withholding of a certain 
                        amount, the withholding of such an amount by 
                        the employer under subparagraph (A) shall 
                        constitute satisfaction of the employee's 
                        obligation to pay the standard health plan with 
                        respect to such amount.
                            ``(ii) Direct payment allowed in case of 
                        nonpayment.--In the case of the nonpayment to a 
                        standard health plan of any amount withheld by 
                        an employer, the plan shall notify such 
                        employee of such nonpayment and shall allow the 
                        employee to make direct payments to the plan 
                        effective with the next succeeding payment 
                        period.
            ``(3) Authority to charge administrative fee.--Any employer 
        providing a payroll deduction for a premium with respect to a 
        health plan may charge a nominal administrative fee to cover 
        the marginal costs of processing such deduction, except that 
        this paragraph shall not apply to any plan offered through the 
        employer (including any plan offered through a purchasing 
        cooperative on behalf of the employer).
    ``(d) Time Period for Employers.--An employer shall meet the 
requirements of this section with respect to any new employee within 
the 30-day period beginning on the date of hire.

``SEC. 21402. MAINTENANCE OF EFFORT FOR COVERAGE OF CHILDREN.

    ``Each employer making an employer contribution toward the coverage 
of the children of the employees of such employer as of July 1, 1994, 
shall continue such contribution to the certified standard health plan 
offering the standard benefits package chosen by the employee.

``SEC. 21403. DEVELOPMENT OF LARGE EMPLOYER PURCHASING GROUPS.

    ``(a) In General.--Nothing in this title shall be construed as 
prohibiting 2 or more experience-rated employers from joining together 
to purchase insurance for their employees, except that each such 
employer shall be responsible for meeting the employer's requirements 
under this title with respect to its employees.
    ``(b) No Use of Purchasing Cooperatives.--An experience-rated 
employer shall be ineligible to purchase health insurance through a 
purchasing cooperative.

``SEC. 21404. ENFORCEMENT.

    ``A State program shall provide for the monitoring and enforcement 
of the requirements of this part. In the case of any employer which 
fails to meet any requirement under this part with respect to any 
employee, the State program shall impose a civil money penalty on such 
employer in an amount not more than 25 percent of the wages of such 
employee during the period of such failure. The State program shall 
provide that provisions similar to the provisions of section 1128A 
(other than subsections (a) and (b)) shall apply to civil money 
penalties imposed under this section in the same manner as they apply 
to a penalty or proceeding under section 1128A(a).

   ``PART II--ACCESS THROUGH HEALTH INSURANCE PURCHASING COOPERATIVES

           ``Subpart A--Functions of Purchasing Cooperatives

``SEC. 21411. ENROLLMENT OF COMMUNITY-RATED INDIVIDUALS IN CERTIFIED 
              STANDARD HEALTH PLANS.

    ``(a) In General.--A purchasing cooperative shall offer, on behalf 
of all certified standard health plans with which an agreement was 
entered into under section 21413 and in accordance with the enrollment 
procedures of such plans, enrollment in the plans only to community-
rated individuals residing or employed in the community rating area 
served by the purchasing cooperative.
    ``(b) Outreach.--In carrying out its responsibilities under 
subsection (a), a purchasing cooperative shall perform such activities, 
including outreach, as may be necessary to actively seek the enrollment 
of community-rated individuals, including children and pregnant women 
who are eligible for subsidies under part B of title XIX or individuals 
who reside in medically underserved areas.

``SEC. 21412. DUTIES OF PURCHASING COOPERATIVES.

    ``(a) In General.--Subject to subsection (b), each purchasing 
cooperative shall--
            ``(1) enroll community-rated individuals in certified 
        standard health plans in accordance with section 21411;
            ``(2) collect premiums from individuals enrolled in 
        certified standard health plans through the purchasing 
        cooperative and forward such premiums to the plans;
            ``(3) enter into agreements only with certified standard 
        health plans under section 21413;
            ``(4) ensure that the services of the purchasing 
        cooperative are accessible throughout the community rating 
        area;
            ``(5) ensure such accessibility by providing information in 
        accordance with section 21414;
            ``(6) establish a process for the receipt and disposition 
        of complaints regarding the performance of its duties;
            ``(7) coordinate activities with other purchasing 
        cooperatives under section 21420;
            ``(8) report to the participating State such information 
        regarding marketing, enrollment, and administrative expenses as 
        the Secretary requires;
            ``(9) comply with such fiduciary responsibilities as the 
        Secretary requires; and
            ``(10) carry out other functions provided for under this 
        title.
    ``(b) Limitation on Activities.--A purchasing cooperative shall 
not--
            ``(1) approve and enforce payment rates for providers;
            ``(2) regulate premium rates for health plans;
            ``(3) certify or enforce compliance of certified standard 
        health plans with the requirements of subtitle B;
            ``(4) assume financial risk in relation to any such plan; 
        or
            ``(5) perform other activities identified by the 
        participating State as being inconsistent with the performance 
        of its duties under subsection (a).
    ``(c) Performance of Duties.--
            ``(1) In general.--If the participating State finds that a 
        purchasing cooperative is not carrying out its duties as 
        required under subsections (a) and (b), the State shall notify 
        the Board of Directors of such finding and permit such Board an 
        opportunity to take such action as may be necessary for the 
        purchasing cooperative to carry out such duties.
            ``(2) Corrective action.--If, after such an opportunity, 
        the deficiency has not been corrected, the participating State 
        may--
                    ``(A) order the purchasing cooperative to hold a 
                new election for members of the Board,
                    ``(B) take such other action as may be appropriate 
                in order to assure the performance of such duties, or
                    ``(C) take actions described in both subparagraphs 
                (A) and (B).
            ``(3) Performance criteria.--The participating State shall 
        develop criteria relating to the performance of duties by 
        purchasing cooperatives.

``SEC. 21413. AGREEMENTS WITH CERTIFIED STANDARD HEALTH PLANS.

    ``(a) Agreements.--
            ``(1) In general.--Except as provided in paragraph (2), 
        each purchasing cooperative for a community rating area may 
        enter into an agreement under this section with any certified 
        standard health plan the purchasing cooperative desires to be 
        made available through such purchasing cooperative.
            ``(2) Minimum requirement.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), each purchasing cooperative--
                            ``(i) shall enter into an agreement under 
                        paragraph (1) with at least 3 community-rated 
                        certified standard health plans which provide 
                        the standard benefit package under subtitle C, 
                        including, if available, a fee-for-service plan 
                        and a health plan with a point-of-service 
                        option, and
                            ``(ii) may enter into an agreement with 
                        community-rated certified standard health plans 
                        which provide the alternative standard benefit 
                        package under subtitle C or with community-
                        rated certified supplemental health benefit 
                        plans.
                    ``(B) Waiver of requirement.--The Governor of a 
                participating State may waive the requirement under 
                subparagraph (A) for any purchasing cooperative in a 
                rural area of such State which demonstrates an 
                insufficient population density to support 3 community-
                rated certified standard health plans.
            ``(3) Termination of agreement.--An agreement under 
        paragraph (1) shall remain in effect for a 12-month period, 
        except that the purchasing cooperative may terminate an 
        agreement under paragraph (1) if the certified standard health 
        plan's certification under section 21101 is terminated or for 
        other good cause shown.
            ``(4) No prohibition on offering of plans.--Nothing in this 
        subsection shall be construed as prohibiting a certified 
        standard health plan with which a purchasing cooperative has 
        declined to enter into an agreement under paragraph (1) from 
        being offered to community-rated individuals within a community 
        rating area.
    ``(b) Receipt of Premiums on Behalf of Plans.--
            ``(1) In general.--An agreement under this section shall 
        provide that--
                    ``(A) payment of premiums to which subparagraph (B) 
                does not apply shall be made by individuals directly to 
                the purchasing cooperative for the benefit of the plan, 
                and
                    ``(B) payments of premiums which an employer is 
                required to make under section 21401(c) shall be made 
                by the employer directly to the purchasing cooperative 
                for the benefit of the plan.
            ``(2) Payment of premiums.--The purchasing cooperative may 
        provide for reasonable penalties and grace periods for late 
        payment.
            ``(3) Certified standard health plans retain risk of 
        nonpayment.--Nothing in this subsection shall be construed as 
        placing upon a purchasing cooperative any risk associated with 
        the failure of individuals and employers to make prompt payment 
        of premiums (other than the portion of the premium representing 
        the purchasing cooperative administrative fee under section 
        21415).
    ``(c) Forwarding of Premiums.--
            ``(1) In general.--The purchasing cooperative shall forward 
        to a certified standard health plan the amount of any premiums 
        collected by such cooperative on behalf of such plan.
            ``(2) Payments.--Payments shall be made by the purchasing 
        cooperative under this subsection within a period of days 
        (specified by the Secretary and not to exceed 7 days) after 
        receipt of the premium.

``SEC. 21414. PROVISION OF INFORMATION.

    ``Each purchasing cooperative for a community rating area shall 
make available to each employer (other than an experience-rated 
employer) located in the community rating area and each community-rated 
individual residing in such area--
            ``(1) enrollment information, including information 
        provided to the purchasing cooperative under section 21013 by 
        the participating State in which such cooperative is located, 
        and
            ``(2) the opportunity to enter into an agreement with the 
        cooperative for the purchase of a certified standard health 
        plan.
The provision of information described in paragraph (1) may also be 
made at designated public access sites, including public libraries and 
local government offices.

``SEC. 21415. ADMINISTRATIVE FEES.

    ``(a) In General.--A purchasing cooperative may impose an 
administrative fee with respect to a community-rated individual 
enrolled under a certified standard health plan offered through the 
purchasing cooperative.
    ``(b) Fee.--The Secretary shall establish criteria for determining 
the administrative fees charged by cooperatives under subsection (a).

   ``Subpart B--Organization and Operation of Purchasing Cooperatives

``SEC. 21417. ESTABLISHMENT.

    ``(a) Establishment of Cooperatives.--
            ``(1) In general.--Any person meeting the requirements of 
        this part may establish a purchasing cooperative.
            ``(2) State sponsorship.--If a not-for-profit purchasing 
        cooperative has not been organized in a community rating area 
        in a participating State, the State shall, on or before January 
        1, 1996, establish or sponsor, by legislation or otherwise, at 
        least one not-for-profit purchasing cooperative to serve in 
        such community rating area.
    ``(b) Rules of Construction.--
            ``(1) Nonexclusive.--Nothing in this section shall be 
        construed as requiring that there be only one purchasing 
        cooperative serving a community rating area.
            ``(2) Single organization serving multiple community rating 
        areas.--
                    ``(A) In general.--Nothing in this section shall be 
                construed as preventing a single not-for-profit 
                corporation from being a purchasing cooperative for 
                more than one community rating area.
                    ``(B) Reporting.--If a purchasing cooperative 
                serves more than one community rating area and such 
                community rating areas are located in more than one 
                State, the purchasing cooperative shall separately 
                report to each State with respect to the residents of 
                such State.
            ``(3) Role of insurers.--An insurer may not form or 
        underwrite a purchasing cooperative, but may administer such a 
        cooperative.
            ``(4) Role of governmental units.--Units of State or local 
        governments may form purchasing cooperatives.

``SEC. 21418. BOARD OF DIRECTORS.

    ``(a) In General.--A purchasing cooperative shall be governed by a 
Board of Directors (in this part, referred to as the `Board'), 
appointed consistent with the provisions of this section. All powers 
vested in a purchasing cooperative under this title shall be vested in 
the Board.
    ``(b) Membership.--
            ``(1) In general.--The Board shall consist of--
                    ``(A) members who represent individuals who 
                purchase coverage through the cooperative, including 
                employees who purchase such coverage; and
                    ``(B) members who represent employers who purchase 
                coverage through a cooperative.
            ``(2) Equal representation of employers and consumers.--The 
        number of members of the Board described under subparagraph (A) 
        of paragraph (1) shall be the same as the number of members 
        described in subparagraph (B) of such paragraph.
    ``(c) No Conflict of Interest Permitted.--An individual may not 
serve as a member of the Board if the individual is one of the 
following (or an immediate family member of one of the following):
            ``(1) A health care provider.
            ``(2) An individual who is an employee or member of the 
        board of directors of, has a substantial ownership interest in, 
        or derives substantial income from, a health care provider, 
        health plan, pharmaceutical company, or a supplier of medical 
        equipment, devices, or services.
            ``(3) A person who derives substantial income from the 
        provision of health care.
            ``(4) A member or employee of an association, law firm, or 
        other institution or organization that represents the interests 
        of one or more health care providers, health plans, or others 
        involved in the health care field, or an individual who 
        practices as a professional in an area involving health care.
    ``(d) Limitation on Compensation.--A purchasing cooperative shall 
not provide compensation to members of the Board other than 
reimbursement for reasonable and necessary expenses incurred in the 
performance of their duties as members of the Board.
    ``(e) Provider Advisory Board.--The Board shall establish a 
provider advisory board consisting of representatives of health care 
providers and professionals who provide covered items and services 
through certified standard health plans offered by the purchasing 
cooperative.

``SEC. 21419. PROHIBITION AGAINST SELF-DEALING AND CONFLICTS OF 
              INTEREST.

    ``(a) Promulgation of Standards.--Each participating State shall 
promulgate standards of conduct in accordance with subsection (b) for 
any administrator, officer, trustee, fiduciary, custodian, counsel, 
agent, or employee of any purchasing cooperative.
    ``(b) Requirements for Standards.--The standards of conduct 
referred to in subsection (a) shall set forth--
            ``(1) the types of investment interests, ownership 
        interests, affiliations, or other employment that would be 
        improper for an individual described in subsection (a) to hold 
        during the time of the individual's service or employment with 
        the purchasing cooperative; and
            ``(2) the circumstances that will constitute impermissible 
        conflicts of interest or self-dealing by such employees in 
        performing their official duties and functions for a purchasing 
        cooperative.
    ``(c) Specific Prohibitions.--No individual described in subsection 
(a) shall, directly or indirectly--
            ``(1) operate, represent, be employed by, or be affiliated 
        with a health plan participating in the same community rating 
        area; and
            ``(2) use any of the information acquired through the 
        relationship of such person or entity with the purchasing 
        cooperative for purposes unrelated to such person's or entity's 
        duties with such cooperative.

``SEC. 21420. COORDINATION AMONG PURCHASING COOPERATIVES.

    ``The State shall establish rules for coordination among purchasing 
cooperatives in cases in which employers are located in one community 
rating area and their employees who are community-rated individuals 
reside in a different community rating area.

              ``PART III--ACCESS THROUGH ASSOCIATION PLANS

                ``Subpart A--Qualified Association Plans

``SEC. 21431. TREATMENT OF QUALIFIED ASSOCIATION PLANS.

    ``(a) General Rule.--For purposes of this title, in the case of a 
qualified association plan--
            ``(1) except as otherwise provided in this subpart, the 
        plan shall be required to meet all applicable requirements of 
        this title for certified standard health plans providing the 
        standard benefit package under subtitle C which are offered by 
        experience-rated employers,
            ``(2) if such plan is certified as meeting such 
        requirements, such plan shall be treated as a plan established 
        and maintained by an experienced-rated employer and individuals 
        enrolled in such plan shall be treated as experience-rated 
        individuals, and
            ``(3) any individual who is a member of the association not 
        enrolling in the plan shall not be treated as an experience-
        rated individual solely by reason of membership in such 
        association.
    ``(b) Election To Be Treated as Purchasing Cooperative.--Subsection 
(a) shall not apply to a qualified association plan if--
            ``(1) the health plan sponsor makes an irrevocable election 
        to be treated as a purchasing cooperative for purposes of this 
        title, and
            ``(2) such sponsor meets all requirements of this title 
        applicable to a purchasing cooperative.

``SEC. 21432. MODIFICATIONS OF STANDARDS APPLICABLE TO QUALIFIED 
              ASSOCIATION PLANS.

    ``(a) Certifying Authority.--For purposes of this title, the 
Secretary of Labor shall be the appropriate certifying authority with 
respect to a qualified association plan.
    ``(b) Capital Requirements.--
            ``(1) In general.--The solvency requirements established 
        under the regulations under paragraph (2) shall, on and after 
        the effective date of such regulations, apply in lieu of the 
        requirements under section 21122.
            ``(2) Solvency requirements.--
                    ``(A) In general.--The Secretary of Labor shall 
                prescribe by regulation--
                            ``(i) solvency standards for qualified 
                        association plans which will ensure that 
                        benefits under such plans will be provided in 
                        full when due, and
                            ``(ii) rules for monitoring and enforcing 
                        compliance with such standards.
        Such regulations may provide procedures under which the 
        Secretary may enter into an agreement with a State to have the 
        State enforce the Federal standards or State standards not 
        inconsistent with the Federal standards.
                    ``(B) Assets held in trust.--For purposes of 
                complying with regulations prescribing solvency 
                standards pursuant to subparagraph (A), the plan 
                sponsor of each qualified association plan shall, in 
                accordance with such regulations, take such steps as 
                are necessary to ensure that plan assets held for the 
                purpose of complying with such solvency standards are 
                held in trust under the plan and are available solely 
                for such purpose.
    ``(c) Availability.--Except in the case of a qualified association 
plan with respect to which an election is in effect under section 
21431(b), a qualified association plan may only include in coverage any 
individual who is a member of the association establishing or 
maintaining the plan, an employee of such member, or a spouse or 
dependent of either.
    ``(d) Limitation on Growth.--The number of participants enrolled in 
a qualified association plan for any year shall not exceed 110 percent 
of the number of participants enrolled in the plan during the preceding 
year.

``SEC. 21433. QUALIFIED ASSOCIATION PLAN DEFINED.

    ``(a) In General.--The term `qualified association plan' means a 
health plan which--
            ``(1) is (or is a continuation of) an existing plan, and
            ``(2) is established or maintained by a qualified 
        association.
    ``(b) Existing Plan.--For purposes of this section, a health plan 
is an existing plan if such plan--
            ``(1) was in existence and operating at all times as a 
        multiple employer welfare arrangement (or rural electric 
        cooperative or rural telephone cooperative association plan) 
        during the 3-year period ending on the date of the enactment of 
        the Health Security Act, and
            ``(2) covered at least 500 participants in the United 
        States on June 1, 1994.
    ``(c) Qualified Association.--For purposes of this section, the 
term `qualified association' means any organization which--
            ``(1) is organized and maintained in good faith by a trade 
        association, an industry association, a professional 
        association, a chamber of commerce, a religious organization, 
        or public entity association,
            ``(2) is organized and maintained for substantial purposes 
        other than to provide a health plan,
            ``(3) has a constitution, bylaws, or other similar 
        governing document which states its purpose,
            ``(4) receives the active support of its members, and
            ``(5) has been in operation continuously during the 3-year 
        period ending on the date of the enactment of the Health 
        Security Act.
    ``(d) Special Rule for Certain Arrangements.--
            ``(1) In general.--If, as of June 1, 1994, a multiple 
        employer welfare arrangement had been in existence at least 18 
        months and an application with the State insurance commissioner 
        for a certificate of operation as a health plan had been 
        approved or was pending, the requirements of subsections (a)(2) 
        and (b)(1) shall not apply to such arrangement.
            ``(2) Disqualification of certain arrangements.--A multiple 
        employer welfare arrangement shall not be treated as meeting 
        the requirements of paragraph (1) if a State demonstrates 
        that--
                    ``(A) fraudulent or material misrepresentations 
                have been made by the sponsor in the application,
                    ``(B) the arrangement that is the subject of the 
                application, on its face, fails to meet the 
                requirements for a complete application, or
                    ``(C) a financial impairment exists with respect to 
                the applicant that is sufficient to demonstrate the 
                applicant's inability to continue its operations.
    ``(e) Coordination With Subpart B.--The term `qualified association 
plan' shall not include a plan to which subpart B applies.
    ``(f) Definitions.--For purposes of this subchapter, the terms 
`multiple employer welfare arrangement', `rural electric cooperative', 
and `rural telephone cooperative association' have the meanings given 
such terms by section 3(40) of the Employee Retirement Income Security 
Act of 1974 (as in effect before the date of the enactment of the 
Health Security Act).

      ``Subpart B--Special Rule for Church and Multiemployer Plans

``SEC. 21435. SPECIAL RULE FOR CHURCH AND MULTIEMPLOYER PLANS.

    ``(a) General Rule.--For purposes of this title, in the case of a 
health plan to which this section applies--
            ``(1) except as otherwise provided in this part, the plan 
        shall be required to meet all applicable requirements of this 
        title for certified standard health plans providing the 
        standard benefit package under subtitle C which are offered by 
        experience-rated employers,
            ``(2) if such plan is certified as meeting such 
        requirements, such plan shall be treated as a plan established 
        and maintained by an experience-rated employer and individuals 
        enrolled in such plan shall be treated as experience-rated 
        individuals, and
            ``(3) any individual eligible to enroll in the plan who 
        does not enroll in the plan shall not be treated as an 
        experience-rated individual solely by reason of being eligible 
        to enroll in the plan.
    ``(b) Modified Standards.--
            ``(1) Certifying authority.--For purposes of this title, 
        the Secretary of Labor shall be the appropriate certifying 
        authority with respect to a plan to which this section applies.
            ``(2) Solvency and availability.--Rules similar to the 
        rules of subsections (b) and (c) of section 21432 shall apply 
        to a plan to which this section applies.
            ``(3) Access.--An employer which, pursuant to a collective 
        bargaining agreement, offers an employee the opportunity to 
        enroll in a plan described in subsection (c)(2) shall not be 
        required to make any other plan available to the employee.
    ``(c) Plans to Which Section Applies.--This section shall apply to 
a health plan which--
            ``(1) is a church plan (as defined in section 414(e) of the 
        Internal Revenue Code of 1986) which has 100 or more 
        participants in the United States, or
            ``(2) is a multiemployer plan (as defined in section 3(37) 
        of the Employee Retirement Income Security Act of 1974) which 
        is maintained by a health plan sponsor described in section 
        3(16)(B)(iii) of such Act but only if such plan (or a 
        predecessor plan)--
                    ``(A) offered health benefits as of June 1, 1994, 
                and
                    ``(B) as of June 1, 1994--
                            ``(i) covered at least 500 participants in 
                        the United States, or
                            ``(ii) was maintained by one or more 
                        affiliates of the same labor organization, or 
                        one or more affiliates of labor organizations 
                        representing employees in the same industry, 
                        covering at least 500 employees in the United 
                        States.

   ``Subtitle E--Implementation of Consumer Information Programs and 
                            Quality Research

``SEC. 21501. CONSUMER INFORMATION PROGRAMS.

    ``(a) In General.--To support the consumer information program 
established by each participating State under section 21013, the 
Secretary, in consultation with the National Health Plan Standards and 
Quality Advisory Committee (established under section 21101(c)), 
shall--
            ``(1) develop a set of national measures of quality 
        performance under subsection (b);
            ``(2) determine a national standard survey design and 
        sampling strategy;
            ``(3) determine a standard format for comparative value 
        information;
            ``(4) determine appropriate case-mix adjustments for data 
        comparisons;
            ``(5) approve interstate geographic areas with respect to 
        which comparative value information may be prepared;
            ``(6) establish standards for the distribution of such 
        information; and
            ``(7) provide technical assistance and training.
    ``(b) National Measures of Quality Performance.--
            ``(1) In general.--The Secretary shall develop a set of 
        national measures of quality performance in accordance with 
        paragraph (2), which shall be used--
                    ``(A) to provide comparative value information for 
                consumers under section 21013, and
                    ``(B) to assess the provision of health care 
                services and access to such services.
            ``(2) Subject of measures.--National measures of quality 
        performance shall be developed in accordance with criteria to 
        be determined by the Secretary and shall measure information on 
        the following subjects:
                    ``(A) Access to health care services by consumers.
                    ``(B) Appropriateness of health care services 
                provided to consumers.
                    ``(C) Outcomes of health care services and 
                procedures.
                    ``(D) Health promotion.
                    ``(E) Prevention of diseases, disorders, and other 
                health conditions.
                    ``(F) Consumer satisfaction with care.
                    ``(G) Risk assessment factors.
                    ``(H) Population health status.
            ``(3) Modifications to performance measures.--The Secretary 
        shall update the set of national measures of quality 
        performance developed under paragraph (1) as the Secretary 
        determines appropriate.
    ``(c) Population Health Status.--The Secretary, in consultation 
with public health experts and the National Health Plan Standards and 
Quality Advisory Committee (established under section 21101(c)), shall 
develop and define methods to measure population health status, 
including risk factor assessment. The Secretary shall use the methods 
developed for measuring population health status as the basis for 
developing consumer-focused quality improvement goals and the health 
plan standards in section 21124.

``SEC. 21502. HEALTH SERVICES AND QUALITY IMPROVEMENT RESEARCH.

    ``(a) Health Services Research.--
            ``(1) In general.--The Secretary shall direct the Agency 
        for Health Care Policy and Research and the Health Care 
        Financing Administration to support and conduct research on the 
        effects of health care reform on health care delivery systems 
        and methods for risk adjustment.
            ``(2) Quality research.--The Agency for Health Care Policy 
        and Research shall conduct and support research on medical 
        effectiveness including--
                    ``(A) outcomes research;
                    ``(B) clinical practice guidelines;
                    ``(C) technology assessment; and
                    ``(D) dissemination and implementation techniques.
    ``(b) Authorization of Appropriations.--In addition to any other 
amounts appropriated to carry out the provisions of this section from 
the Biomedical and Behavioral Research Trust Fund under section 9553 of 
the Internal Revenue Code of 1986, there are authorized to be 
appropriated $150,000,000 for fiscal year 1995, $400,000,000 for fiscal 
year 1996, $500,000,000 for fiscal year 1997, and $600,000,000 for the 
fiscal years 1998 through 2004.

``SEC. 21503. IMPLEMENTING QUALITY IMPROVEMENT RESEARCH.

    ``(a) In General.--The Secretary shall award grants to States or 
community-based, independent, not-for-profit organizations that have 
submitted applications in accordance with subsection (b) to establish 
demonstration projects that provide certified standard health plans 
with the technical assistance to implement the results of quality 
improvement research into medical practice.
    ``(b) Application.--For purposes of subsection (a), an application 
is in accordance with this subsection if the applicant submits the 
application to the Secretary at such time, in such manner, and 
containing such information and assurances as the Secretary may 
reasonably require.
    ``(c) Availability of Trust Fund Amounts.--There shall be available 
$50,000,000 in each of the fiscal years 1996 through 2004 from the 
Health Security Trust Fund established under section 9551 of the 
Internal Revenue Code of 1986 to make grants under subsection (a).

``SEC. 21504. ANNUAL REPORTS.

    ``The Secretary shall provide an annual report to Congress which--
            ``(1) reviews the results of the quality improvement 
        research grants under section 21503;
            ``(2) evaluates consumer information programs established 
        by participating States;
            ``(3) tracks the evolution of national performance measures 
        and other research; and
            ``(4) evaluates State, regional, and national trends on 
        quality of health care.

     ``Subtitle F--Programs to Improve Access To Underserved Areas

``PART I--GRANTS FOR THE DEVELOPMENT AND OPERATION OF COMMUNITY HEALTH 
                   GROUPS AND FOR CAPITAL ASSISTANCE

``SEC. 21601. DESIGNATION OF RURAL AND URBAN UNDERSERVED AREAS.

    ``(a) State Designation.--
            ``(1) In general.--Subject to paragraph (2), a 
        participating State may designate areas within the State as 
        rural or urban underserved areas in accordance with the 
        criteria developed by the Secretary under subsection (c).
            ``(2) Secretarial approval of state designation.--A State 
        designation of an area within the State as a rural or urban 
        underserved area is subject to approval by the Secretary.
    ``(b) Designation by the Secretary.--In addition to rural and urban 
underserved areas designated by a participating State under subsection 
(a)(1) and approved by the Secretary under subsection (a)(2), the 
Secretary may designate additional areas within participating States as 
rural or urban underserved areas in accordance with the criteria 
developed by the Secretary under subsection (c).
    ``(c) Criteria.--The Secretary shall develop criteria for 
designating an area as a rural or underserved area. Such criteria shall 
take into account--
            ``(1) whether the area is--
                    ``(A) an area in an urban or rural area (which need 
                not conform to the geographic boundaries of a political 
                subdivision and which is a rational area for the 
                delivery of health services) which the Secretary 
                determines has a health manpower shortage,
                    ``(B) a population group which the Secretary 
                determines has such a shortage, or
                    ``(C) a public or nonprofit private medical 
                facility or other public facility which the Secretary 
                determines has such a shortage,
        except that the Secretary shall not remove an area from an area 
        determined to be an area described in subparagraph (A) until 
        the Secretary has afforded interested persons and groups in 
        such area an opportunity to provide data and information in 
        support of the designation as such an area or a population 
        group described in subparagraph (B) or a facility described in 
        subparagraph (C), and has made a determination on the basis of 
        the data and information submitted by such persons and groups 
        and other data and information available to the Secretary;
            ``(2) whether a significant number of individuals who are 
        furnished health care services in the area are members of a 
        population of an urban or rural area designated by the 
        Secretary as an area with a shortage of personal health 
        services or are a population group designated by the Secretary 
        as having a shortage of such services;
            ``(3) the financial and geographic access to certified 
        standard health plans;
            ``(4) the availability, adequacy, and quality of health 
        care providers and health care facilities; and
            ``(5) the health status of residents of the area.

``SEC. 21602. COMMUNITY HEALTH GROUP; CERTIFIED COMMUNITY HEALTH PLAN; 
              COMMUNITY HEALTH NETWORK; ELIGIBLE ENTITIES; ISOLATED 
              RURAL FACILITIES.

    ``(a) Community Health Group.--For purposes of this part, the term 
`community health group' means a certified community health plan or a 
community health network.
    ``(b) Community Health Network.--For purposes of this part, the 
term `community health network' means a consortium of health care 
providers that--
            ``(1) is a public or non-profit private entity;
            ``(2) furnishes at least a portion of the services included 
        in the standard benefit package either directly or indirectly 
        through affiliations with other entities;
            ``(3) has an agreement with one or more certified standard 
        health plans;
            ``(4) has a written agreement with each of the health care 
        providers in the consortium governing the participation of the 
        providers;
            ``(5) has as participating members of the consortium two or 
        more of the categories of eligible entities described in 
        subsection (d);
            ``(6) ensures that the health care services furnished by 
        the consortium are available and accessible to each client with 
        reasonable promptness; and
            ``(7) furnishes a significant volume of health care 
        services in a rural or urban underserved area designated by the 
        State and approved by the Secretary under section 21601(a), or 
        designated by the Secretary under subsection (b) of such 
        section.
    ``(c) Certified Community Health Plan.--For purposes of this part, 
the term `certified community health plan' means a health plan that--
            ``(1) is a public or nonprofit private entity;
            ``(2) furnishes a significant volume of health care 
        services in a rural or urban underserved area designated by the 
        State and approved by the Secretary under section 21601(a), or 
        designated by the Secretary under subsection (b) of such 
        section;
            ``(3) has two or more of the categories of eligible 
        entities described in subsection (d) furnishing health services 
        through the health plan;
            ``(4) ensures that each individual enrolled with the plan 
        has a primary care provider; and
            ``(5) meets all other criteria required of a certified 
        standard health plan, including the offering of a standard 
        benefits package under subtitle C.
    ``(d) Eligible Entities.--For purposes of this part, the term 
`eligible entities' means the following categories of entities:
            ``(1) Physicians, other health professionals, or health 
        care institutions, including public hospitals, that provide a 
        significant amount of health care services in a rural or urban 
        underserved area designated by the State and approved by the 
        Secretary under section 21601(a) or designated by the Secretary 
        under subsection (b) of such section.
            ``(2) Entities providing health services under grants under 
        sections 329 and 330 of the Public Health Service Act.
            ``(3) Entities providing health services under grants under 
        sections 340 and 340A of such Act.
            ``(4) Entities providing health services under grants under 
        section 1001 or title XXVI of such Act.
            ``(5) Entities providing health services under title V of 
        the Social Security Act.
            ``(6) Entities providing health services through rural 
        health clinics (as defined in section 1861(aa)(2)) and other 
        federally qualified health centers (as defined in 1861(aa)(4)).
            ``(7) Entities providing health services in urban areas 
        through programs under title V of the Indian Health Care 
        Improvement Act, and entities providing outpatient health 
        services through programs under the Indian Self-Determination 
        Act.
            ``(8) Programs providing personal health services and 
        operating through State or local public health agencies.
            ``(9) Isolated rural facilities (as defined in subsection 
        (e)).
    ``(e) Isolated Rural Facilities.--The term `isolated rural 
facility' means a facility providing health services that is located in 
a county (or equivalent unit of local government) with fewer than 6 
residents per square mile.

  ``Subpart A--Grants for the Development and Operation of Community 
                             Health Groups

``SEC. 21611. GRANTS AND CONTRACTS FOR DEVELOPMENT OF PLANS AND 
              NETWORKS.

    ``(a) In General.--In the case of a public or private non-profit 
consortium of eligible entities that submits an application in 
accordance with subsection (b), the Secretary may make grants to and 
enter into contracts with such consortium for the development of 
community health groups.
    ``(b) Application.--For purposes of subsection (a), an application 
is in accordance with this subsection if--
            ``(1) the applicant submits an application to the Secretary 
        at such time and in such manner as the Secretary may reasonably 
        require;
            ``(2) the application is accompanied by an assessment of 
        need of the population or populations proposed to be served by 
        the applicant;
            ``(3) the application is accompanied by the following 
        information:
                    ``(A) A description of how the applicant will 
                design the proposed community health group (including 
                the service sites involved) for such populations based 
                on the assessment of need.
                    ``(B) A description of efforts to secure, within 
                the proposed service area of such community health 
                group (including the service sites involved), financial 
                and professional assistance and support for the 
                project.
                    ``(C) Evidence of significant community involvement 
                in the initiation, development and ongoing operation of 
                the project;
            ``(4) the application is accompanied by the assurances 
        described in subsection (c); and
            ``(5) the application is accompanied by such additional 
        assurances, agreements and other information as the Secretary 
        may reasonably require.
    ``(c) Assurances Described.--The assurances described in this 
subsection are the following:
            ``(1) Guaranteed access and continued delivery of health 
        care services in a designated area.--An assurance that the 
        applicant involved will furnish--
                    ``(A) a significant volume of health care services 
                within a rural or urban underserved area designated by 
                the State and approved by the Secretary under section 
                21601(a) or designated by the Secretary under 
                subsection (b) of such section, and
                    ``(B) health care services without regard to the 
                financial or insurance status of an individual.
            ``(2) Accessibility of services.--
                    ``(A) Services for certain individuals.--An 
                assurance that the applicant will ensure that the 
                services of the applicant will be accessible directly 
                or through formal contractual arrangements with its 
                participating providers regardless of whether 
                individuals who seek care from the applicant are 
                eligible individuals (as such term is defined in 
                section 1958(3)).
                    ``(B) Use of third-party payors.--An assurance that 
                the applicant will ensure that the health care 
                providers of the group are all approved by the 
                Secretary as providers under title XVIII and by the 
                appropriate State agency as providers under title XIX, 
                and the applicant has made or will make every 
                reasonable effort to collect appropriate reimbursement 
                for its costs in providing health services to 
                individuals who are enrolled in a private health 
                insurance program or certified standard health plan, or 
                who are entitled to insurance benefits under title 
                XVIII, medical assistance under a State plan approved 
                under title XIX, or to assistance for medical expenses 
                under any other public assistance program.
                    ``(C) Schedule of fees.--An assurance that the 
                applicant will--
                            ``(i) prepare a schedule of fees or 
                        payments for the provision of all health care 
                        services furnished by the applicant that is 
                        consistent with locally prevailing rates or 
                        charges and designed to cover its reasonable 
                        costs of operation and has prepared a 
                        corresponding schedule of discounts to be 
                        applied to the payment of such fees or payments 
                        (or payments of cost sharing amounts owed in 
                        the case of covered benefits), which discounts 
                        are applied on the basis of the patient's 
                        ability to pay; and
                            ``(ii) make every reasonable effort to 
                        secure from patients payment in accordance with 
                        such schedules, and to collect reimbursement 
                        for services to persons entitled to public or 
                        private insurance benefits or other medical 
                        assistance on the basis of full fees without 
                        application of discounts, except that the 
                        applicant will ensure that no person is denied 
                        service based on the person's inability to pay 
                        therefor.
                    ``(D) Barriers within service area.--An assurance 
                that the applicant will ensure that the following 
                conditions are met:
                            ``(i) In the service area of the group, the 
                        applicant will ensure that--
                                    ``(I) the services of the applicant 
                                are accessible to all residents; and
                                    ``(II) to the maximum extent 
                                possible, barriers to access to the 
                                services of the applicant are 
                                eliminated, including barriers 
                                resulting from the area's physical 
                                characteristics, its residential 
                                patterns, its economic, social and 
                                cultural groupings, its available 
                                transportation, and the ability of the 
                                area's residents to speak the English 
                                language.
                            ``(ii) The applicant will periodically 
                        conduct reviews within the service area of the 
                        group to determine whether the conditions 
                        described in clause (i) are being met.
            ``(3) Quality control system.--An assurance that the 
        applicant will maintain a community-oriented, patient 
        responsive, quality control system under which the group, in 
        accordance with regulations prescribed by the Secretary--
                    ``(A) conducts an ongoing quality assurance program 
                for the health services delivered by participating 
                provider entities;
                    ``(B) maintains a continuous community health 
                status improvement process; and
                    ``(C) maintains a system for development, 
                compilation, evaluation, and reporting of information 
                to the public regarding the costs of operation, service 
                utilization patterns, availability, accessibility and 
                acceptability of services, developments in the health 
                status of the populations served, uniform health and 
                clinical performance measures and financial performance 
                of the applicant.
            ``(4) Use of existing resources.--An assurance that the 
        applicant will, in developing the community health group 
        involved, utilize existing resources to the maximum extent 
        practicable.
    ``(d) Development Grants.--
            ``(1) Preference.--In making a grant or entering into a 
        contract under subsection (a), the Secretary shall give a 
        greater degree of preference to applicants--
                    ``(A) according to the extent to which a greater 
                number of categories of eligible entities described in 
                section 21602(d) are members of the consortium, except 
                in areas such as rural areas, where providers are 
                severely limited in number, and
                    ``(B) in which the population to be served by the 
                consortium has a higher degree of unmet need.
            ``(2) Use of financial assistance.--A consortium of 
        eligible entities receiving financial assistance under a grant 
        or contract pursuant to subsection (a) may use such assistance 
        for activities relating to the development of a community 
        health group, including--
                    ``(A) planning such group, including entering into 
                contracts between the recipient of the award and health 
                care providers who are to participate in the group;
                    ``(B) recruitment, compensation, training, and 
                retention of health care professionals and 
                administrative staff;
                    ``(C) acquisition and development of information, 
                billing, and reporting systems;
                    ``(D) providing linkages between providers, 
                including through the use of information systems;
                    ``(E) in the case of a consortium receiving a grant 
                or contract pursuant to subsection (a) for the 
                development of a certified community health plan, the 
                establishment of reserves required for furnishing 
                services on a prepaid or capitated basis; and
                    ``(F) such other expenditures as the Secretary 
                determines to be appropriate to support other 
                activities related to the development of community 
                groups.
    ``(e) Reports and Audits.--A public or private non-profit 
consortium of eligible entities that receives a grant or contract under 
subsection (a) shall--
            ``(1) provide such reports and information on activities 
        carried out under this section in a manner and form required by 
        the Secretary; and
            ``(2) provide an annual organizationwide audit that meets 
        applicable standards of the Secretary.
    ``(f) Availability of Funds From Trust Fund.--Except as provided in 
part III, the following amounts shall be available for a calendar year 
for making payments under subsection (a) from the Infrastructure 
Development Account in the Health Security Trust Fund established under 
section 9551 of the Internal Revenue Code of 1986:
            ``(1) In the case of calendar year 1995, $250,000,000.
            ``(2) In the case of calendar year 1996, $300,000,000.
            ``(3) In the case of calendar year 1997, $300,000,000.
            ``(4) In the case of calendar year 1998, $300,000,000.
            ``(5) In the case of calendar year 1999, $200,000,000.
            ``(6) In the case of subsequent calendar years, the amount 
        made available under this subsection for the previous calendar 
        year (without regard to any reduction in such amount under part 
        III), updated through the midpoint of the year by the estimated 
        percentage change in the Consumer Price Index for All Urban 
        Consumers (United States city average) during the 12-month 
        period ending at that midpoint, with appropriate adjustments to 
        reflect previous underestimations or overestimations under this 
        paragraph in the projected percentage change in such Consumer 
        Price Index.

``SEC. 21612. GRANTS AND CONTRACTS FOR OPERATION OF PLANS AND NETWORKS.

    ``(a) In General.--In the case of a community health group that 
submits an application in accordance with subsection (b), the Secretary 
may make grants to and enter into contracts with such groups for the 
operation of such groups.
    ``(b) Application.--For purposes of subsection (a), an application 
is in accordance with this subsection if--
            ``(1) the applicant submits an application to the Secretary 
        at such time and in such manner as the Secretary may reasonably 
        require;
            ``(2) the application is accompanied by an assessment of 
        need of the population or populations served by the applicant;
            ``(3) the application provides evidence of significant 
        community involvement in the ongoing operation of the community 
        health group;
            ``(4) the application is accompanied by the assurances 
        described in section 21611(c); and
            ``(5) the application is accompanied by such additional 
        assurances, agreements, and other information as the Secretary 
        may reasonably require.
    ``(c) Operation Grants.--
            ``(1) Preference.--In making a grant or entering into a 
        contract under subsection (a), the Secretary shall give a 
        greater degree of preference to applicants in accordance with 
        subparagraphs (A) and (B) of section 21611(d)(1).
            ``(2) Use of financial assistance.--A community health 
        group receiving financial assistance for the operation of the 
        group under a grant or contract pursuant to subsection (a) may 
        use such assistance to address geographic, financial, and other 
        barriers to access health care services including--
                    ``(A) transportation, including rural and frontier 
                emergency transportation systems;
                    ``(B) patient outreach;
                    ``(C) patient education;
                    ``(D) translation services;
                    ``(E) consumer information that would improve 
                access to care; and
                    ``(F) other services related to the provision of 
                health care services.
    ``(d) Reports and Audits.--A community health group that receives a 
grant or contract under subsection (a) shall--
            ``(1) provide such reports and information on activities 
        carried out under this section in a manner and form required by 
        the Secretary; and
            ``(2) provide an annual organization-wide audit that meets 
        applicable standards of the Secretary.
    ``(e) Availability of Funds From Trust Fund.--Except as provided in 
part III, the following amounts shall be available for a calendar year 
for making payments under subsection (a) from the Infrastructure 
Development Account in the Health Security Trust Fund established under 
section 9551 of the Internal Revenue Code of 1986:
            ``(1) In the case of calendar year 1995, $230,000,000.
            ``(2) In the case of calendar year 1996, $380,000,000.
            ``(3) In the case of calendar year 1997, $380,000,000.
            ``(4) In the case of calendar year 1998, $400,000,000.
            ``(5) In the case of calendar year 1999, $400,000,000.
            ``(6) In the case of subsequent calendar years, the amount 
        made available under this subsection for the previous calendar 
        year (without regard to any reduction in such amount under part 
        III), updated through the midpoint of the year by the estimated 
        percentage change in the Consumer Price Index for All Urban 
        Consumers (United States city average) during the 12-month 
        period ending at that midpoint, with appropriate adjustments to 
        reflect previous underestimations or overestimations under this 
        paragraph in the projected percentage change in such Consumer 
        Price Index.

                    ``Subpart B--Capital Assistance

``SEC. 21613. LOANS, LOAN GUARANTEES, AND GRANTS FOR CAPITAL 
              INVESTMENT.

    ``(a) In General.--In the case of a community health group or 
isolated rural facility that submits an application in accordance with 
subsection (b), the Secretary may make the financial assistance 
described in subsection (c) available to such group or facility for the 
provision of capital assistance.
    ``(b) Application.--For purposes of subsection (a), an application 
is in accordance with this subsection if--
            ``(1) the applicant submits an application to the Secretary 
        at such time and in such manner as the Secretary may reasonably 
        require;
            ``(2) in the case of an isolated rural facility, such 
        facility submits its application prior to January 1, 1999;
            ``(3) in the case of a project for construction, 
        conversion, expansion or modernization of a facility, the 
        applicant submits to the Secretary the following:
                    ``(A) A description of the site.
                    ``(B) Plans and specifications which meet 
                requirements prescribed by the Secretary.
                    ``(C) Information reasonably demonstrating that 
                title to such site is vested in one or more of the 
                entities filing the application (unless the agreement 
                described in paragraph (4)(A) is made).
                    ``(D) A specification of the type of financial 
                assistance being requested under subsection (a);
            ``(4) in the case of a project for construction, 
        conversion, expansion or modernization of a facility, the 
        application is accompanied by the following agreements:
                    ``(A) Title to such site will be vested in one or 
                more of the entities filing the application (unless the 
                assurance described in paragraph (3)(C) has been 
                submitted under such paragraph).
                    ``(B) Adequate financial support will be available 
                for completion of the project and for its maintenance 
                and operation when completed.
                    ``(C) The facility will be made available to all 
                persons seeking service regardless of their ability to 
                pay;
            ``(5) the application is accompanied by the assurances 
        described in paragraphs section 21611(c) to the same extent and 
        in the same manner as such provisions apply to awards of grants 
        and contracts under such paragraphs, except that if the 
        applicant is an isolated rural facility described in section 
        21602(d)(9) only the assurances described in paragraph (1) and 
        subparagraphs (A), (B), (C), and (D) (if translation services 
        are appropriate) of paragraph (2) of section 21611(c) shall 
        apply; and
            ``(6) the application is accompanied by such additional 
        assurances, agreements and other information as the Secretary 
        may reasonably require.
    ``(c) Financial Assistance Described.--The financial assistance 
that the Secretary may provide under subsection (a) consists of--
            ``(1) loans;
            ``(2) guarantees on the payment of principal and interest 
        to Federal and non-Federal lenders on behalf of community 
        health groups and isolated rural facilities; and
            ``(3) grants for urgent capital needs (in accordance with 
        criteria for determining such needs to be developed by the 
        Secretary).
    ``(d) Priorities Regarding Availability of Financial Assistance.--
            ``(1) Amounts reserved for facilities in rural designated 
        areas.--At least 10 percent of the dollar value of financial 
        assistance made under subsection (a) during any given year 
        shall be allocated to entities described in subsection (a) that 
        serve rural underserved areas designated by the State and 
        approved by the Secretary under section 21601(a) or designated 
        by the Secretary under subsection (b) of such section, to the 
        extent the Secretary receives a sufficient number of qualified 
        applications made by such entities.
            ``(2) Preferences.--In making financial assistance 
        available under subsection (a), the Secretary shall give a 
        greater degree of preference to applicants proposing to use 
        such assistance--
                    ``(A) for projects for the renovation and 
                modernization of medical facilities necessary to 
                prevent or eliminate safety hazards;
                    ``(B) to avoid noncompliance with licensure or 
                accreditation standards; or
                    ``(C) to provide essential services.
            ``(3) Limitation.--The Secretary may authorize the use of 
        amounts under subsection (a) for the construction of new 
        buildings only if--
                    ``(A) the Secretary determines that appropriate 
                facilities are not available through acquiring, 
                modernizing, expanding or converting existing 
                buildings, or that construction of new buildings will 
                cost less; and
                    ``(B) the applicant demonstrates that it has 
                secured assurances of State, local, or other non-
                Federal support of the project.
    ``(e) Amount of Assistance.--The principal amount of loans or loan 
guarantees under subsection (a) may, when added to any other assistance 
under this section, cover up to 100 percent of the costs involved.
    ``(f) Use of Assistance.--
            ``(1) In general.--An entity described in subsection (a) 
        shall use the financial assistance described in such subsection 
        for--
                    ``(A) the acquisition, modernization, conversion, 
                and expansion of facilities that will enhance the 
                provision and accessibility of health care; and
                    ``(B) except as provided in paragraph (2), for the 
                purchase of major equipment, including hardware for 
                information systems.
            ``(2) Isolated rural facilities.--In the case of an 
        isolated rural facility that receives financial assistance to 
        purchase major equipment for the furnishing of telemedicine 
        services, such facility may not use such assistance to purchase 
        high-cost telemedicine technologies that--
                    ``(A) incur high cost per minute of usage charges; 
                or
                    ``(B) require consultants to be available at the 
                same time as the patient and the referring physician.
    ``(g) Terms and Conditions.--
            ``(1) Loans.--Any loan made under subsection (a) shall, 
        subject to the Federal Credit Reform Act of 1990, meet such 
        terms and conditions (including provisions for recovery in case 
        of default) as the Secretary, in consultation with the 
        Secretary of the Treasury, determines to be necessary to carry 
        out the purposes of such section while protecting the financial 
        interests of the United States. Terms and conditions for such 
        loans shall include provisions regarding the following:
                    ``(A) Security.
                    ``(B) Maturity date.
                    ``(C) Amount and frequency of installments.
                    ``(D) Rate of interest, which shall be at a rate 
                comparable to the rate of interest prevailing on the 
                date the loan is made.
        Notwithstanding the provisions of subparagraph (D), the 
        Secretary shall have the discretion to provide for a rate of 
        interest that is lesser than the rate of interest described in 
        such subparagraph.
            ``(2) Loan guarantees.--The Secretary may not approve a 
        loan guarantee under this section unless the Secretary 
        determines that the terms, conditions, security (if any), and 
        schedule and amount of repayments with respect to the loan are 
        sufficient to protect the financial interests of the United 
        States and are otherwise reasonable. Such loan guarantees shall 
        be subject to such further terms and conditions as the 
        Secretary determines, in consultation with the Secretary of the 
        Treasury, and subject to the Federal Credit Reform Act of 1990, 
        to be necessary to ensure that the purposes of this section 
        will be achieved.
    ``(h) Defaults; Right of Recovery.--
            ``(1) Defaults.--
                    ``(A) In general.--The Secretary may take such 
                action as may be necessary to prevent a default on 
                loans or loan guarantees under this section including 
                the waiver of regulatory conditions, deferral of loan 
                payments, renegotiation of loans, and the expenditure 
                of funds for technical and consultative assistance, for 
                the temporary payment of the interest and principal on 
                such a loan, and for other purposes.
                    ``(B) Foreclosure.--The Secretary may take such 
                action, consistent with State law respecting 
                foreclosure procedures, as the Secretary deems 
                appropriate to protect the interest of the United 
                States in the event of a default on a loan made 
                pursuant to this section, including selling real 
                property pledged as security for such a loan or loan 
                guarantee and for a reasonable period of time taking 
                possession of, holding, and using real property pledged 
                as security for such a loan or loan guarantee.
                    ``(C) Waivers.--The Secretary may, for good cause, 
                but with due regard to the financial interests of the 
                United States, waive any right of recovery which the 
                Secretary has by reason of the failure of a borrower to 
                make payments of principal of and interest on a loan 
                made pursuant to this section except that if such loan 
                is sold and guaranteed, any such waiver shall have no 
                effect upon the Secretary's guarantee of timely payment 
                of principal and interest.
            ``(2) Twenty-year obligation; right of recovery.--
                    ``(A) In general.--
                            ``(i) Loans and loan guarantees.--With 
                        respect to a facility for which a loan, or loan 
                        guarantee is to be made pursuant to this 
                        section, the Secretary may provide the loan or 
                        loan guarantee only if the applicant involved 
                        agrees that the applicant will be liable to the 
                        United States for the amount of the loan or 
                        loan guarantee, together with an amount 
                        representing interest, if at any time during 
                        the 20-year period beginning on the date of 
                        completion of the activities involved, the 
                        facility--
                                    ``(I) ceases to be a facility 
                                utilized by a community health group, 
                                or by another public or nonprofit 
                                private entity that provides health 
                                services in one or more areas that are 
                                rural or urban underserved areas 
                                designated by the State and approved by 
                                the Secretary under section 21601(a), 
                                or designated by the Secretary under 
                                subsection (b) of such section; or
                                    ``(II) is sold or transferred to 
                                any entity other than an entity that 
                                is--
                                            ``(aa) a community health 
                                        group or other entity described 
                                        in subclause (I); and
                                            ``(bb) approved by the 
                                        Secretary as a purchaser or 
                                        transferee regarding the 
                                        facility.
                            ``(ii) Direct grants.--With respect to a 
                        facility for which substantial capital costs 
                        are to be paid from a grant made pursuant to 
                        this section, an assurance that the applicant 
                        will be liable to the United States for the 
                        amount of the award expended for such costs, 
                        together with an amount representing interest, 
                        if at any time during the 20-year period 
                        beginning on the date of completion of the 
                        activities involved, the facility--
                                    ``(I) ceases to be a facility 
                                utilized by a community health group, 
                                isolated rural facility, or by another 
                                public or nonprofit private entity that 
                                provides health services in one or more 
                                rural or urban underserved areas 
                                designated by the State and approved by 
                                the Secretary under section 21601(a) or 
                                designated by the Secretary under 
                                subsection (b) of such section; or
                                    ``(II) is sold or transferred to 
                                any entity other than an entity that 
                                is--
                                            ``(aa) a community health 
                                        group or other entity described 
                                        in clause (i); and
                                            ``(bb) approved by the 
                                        Secretary as a purchaser or 
                                        transferee regarding the 
                                        facility.
                    ``(B) Subordination; waivers.--The Secretary may 
                subordinate or waive the right of recovery under clause 
                (i) or (ii) of subparagraph (A), and any other Federal 
                interest that may be derived by virtue of a loan, loan 
                guarantee, or grant under subsection (a), if the 
                Secretary determines that subordination or waiver will 
                further the objectives of this section.
    ``(i) Reports and Audits.--A community health group or isolated 
rural facility that receives a loan, loan guarantee, or grant under 
subsection (a) shall--
            ``(1) provide such reports and information on activities 
        carried out under this section in a manner and form required by 
        the Secretary; and
            ``(2) provide an annual organization-wide audit that meets 
        applicable standards of the Secretary.
    ``(j) Availability of Funds From Trust Fund.--Except as provided in 
part III, the following amounts shall be available for a calendar year 
for making payments under subsection (a) from the Infrastructure 
Development Account in the Health Security Trust Fund established under 
section 9551 of the Internal Revenue Code of 1986:
            ``(1) In the case of calendar year 1995, $500,000,000.
            ``(2) In the case of calendar year 1996, $700,000,000.
            ``(3) In the case of calendar year 1997, $700,000,000.
            ``(4) In the case of calendar year 1998, $700,000,000.
            ``(5) In the case of calendar year 1999, $700,000,000.
            ``(6) In the case of subsequent calendar years, the amount 
        made available under this subsection for the previous calendar 
        year (without regard to any reduction in such amount under part 
        III), updated through the midpoint of the year by the estimated 
        percentage change in the Consumer Price Index for All Urban 
        Consumers (United States city average) during the 12-month 
        period ending at that midpoint, with appropriate adjustments to 
        reflect previous underestimations or overestimations under this 
        paragraph in the projected percentage change in such Consumer 
        Price Index.
    ``(k) Administration of Programs.--This subpart, and any other 
program of the Secretary that provides loans or loan guarantees, shall 
be carried out by a centralized loan unit established within the 
Department of Health and Human Services.

  ``PART II--DEMONSTRATION PROJECTS TO PROMOTE TELEMEDICINE AND OTHER 
         USES OF THE TELECOMMUNICATIONS NETWORK IN RURAL AREAS

``SEC. 21621. DEMONSTRATION PROJECTS TO PROMOTE TELEMEDICINE AND OTHER 
              USES OF THE NETWORK.

    ``(a) Definitions.--For purposes of this section:
            ``(1) Rural health care provider.--The term `rural health 
        care provider' means any health care provider located in a 
        rural area (as defined in section 1886(d)(2)(D)), including a 
        rural referral center, rural clinic, area health center, 
        migrant health center, rural community health center, local 
        health department, and isolated rural facility (as defined in 
        section 21602(e)).
            ``(2) Health resource partner.--The term `health resource 
        partner' means a tertiary care center that is available for 
        consultations 24-hours a day and for follow up care.
            ``(3) Nonhealth care entity.--The term `nonhealth care 
        entity' means any entity that is not involved in the provision 
        of health care, including a business, educational institution, 
        library, and prison.
    ``(b) Establishment.--The Secretary shall award grants to eligible 
entities to establish demonstration projects under which an eligible 
entity establishes a rural-based consortium that enables members of the 
consortium to utilize the telecommunications network--
            ``(1) to strengthen the delivery of health care services in 
        the rural area through the use of telemedicine;
            ``(2) to provide for consultations involving transmissions 
        of detailed data about the patient that serves as a reasonable 
        substitute for face-to-face interaction between the patient and 
        consultant; and
            ``(3) to make outside resources or business interaction 
        more available to the rural area.
    ``(c) Eligible Entity.--An entity eligible to receive a grant under 
this section shall include as members at least--
            ``(1) one rural health care provider and a health resource 
        partner; and
            ``(2) one nonhealth care entity located in the same rural 
        area as the rural health care provider described in paragraph 
        (1) and one other nonhealth care entity.
The Secretary may waive the membership requirement under paragraph (2) 
if the members described in paragraph (1) are unable to locate a 
nonhealth care entity located in the same rural area to participate in 
the demonstration project.
    ``(d) Preferences.--The Secretary shall give greater preference in 
awarding grants under this section to--
            ``(1) applicants that are seeking to serve rural 
        underserved areas designated by the State and approved by the 
        Secretary under section 21601(a) or designated by the Secretary 
        under subsection (b) of such section;
            ``(2) applicants that have integrated health care resources 
        or plan to integrate such resources within the rural area to 
        the maximum extent practicable in order to avoid redundancy of 
        scarce technology; and
            ``(3) applicants that have coordinated usage of the 
        telecommunications infrastructure with other potential 
        telecommunications users in the area to take advantage of 
        economies-of-scale pricing of telecommunications services.
    ``(e) Application.--To be eligible to receive a grant under this 
section, an eligible entity described in subsection (c) shall prepare 
and submit to the Secretary an application at such time, in such 
manner, and containing such information as the Secretary may require, 
including a description of the use to which the eligible entity would 
apply any amounts received under such grant, the source and amount of 
non-Federal funds the entity would pledge for the project, and a 
showing of the long-term sustainability of the project.
    ``(f) Grants.--Grants under this section shall be distributed in 
accordance with the following requirements:
            ``(1) Grant limit.--The Secretary may not make a grant to 
        an eligible entity under this section in excess of $500,000 for 
        each fiscal year in which an eligible entity conducts a project 
        under this section.
            ``(2) Matching funds.--
                    ``(A) In general.--The Secretary may not make a 
                grant to an eligible entity under this section unless 
                the eligible entity agrees to provide non-Federal funds 
                in an amount equal to not less than 20 percent of the 
                total amount to be expended by the eligible entity in 
                any fiscal year for the purpose of conducting the 
                project under this section.
                    ``(B) Adjustments.--The Secretary shall make 
                necessary adjustments to the amount that an eligible 
                entity may receive in a subsequent fiscal year if the 
                eligible entity does not meet the requirements of 
                subparagraph (A) in the preceding fiscal year.
    ``(g) Use of Grant Amounts.--
            ``(1) In general.--Amounts received under a grant awarded 
        under this section shall be utilized for the development and 
        operation of telemedicine systems that serve rural areas. All 
        such grant funds must be used to further the provision of 
        health services to rural areas.
            ``(2) Rules of use.--
                    ``(A) Permissible usages.--Grant funds awarded 
                under this section--
                            ``(i) shall primarily be used to support 
                        the costs of establishing and operating a 
                        telemedicine system that provides specialty 
                        consultations to rural communities;
                            ``(ii) may be used to demonstrate the 
                        application of telemedicine for preceptorship 
                        of medical students, residents, and other 
                        health professions students in rural training 
                        sites;
                            ``(iii) may be used for transmission costs, 
                        salaries, maintenance of equipment, and 
                        compensation of specialists and referring 
                        practitioners; and
                            ``(iv) may be used to demonstrate the use 
                        of telemedicine to facilitate collaboration 
                        between non-physician primary care 
                        practitioners (including physician assistants, 
                        nurse practitioners, certified nurse-midwives, 
                        and clinical nurse specialists) and physicians.
                    ``(B) Prohibited use of funds.--Grant funds shall 
                not be used by members of a rural-based consortium for 
                any of the following:
                            ``(i) Expenditures to purchase or lease 
                        equipment to the extent the expenditures would 
                        exceed more than 40 percent of the total grant 
                        funds.
                            ``(ii) In the case of a member of a 
                        consortium that is an isolated rural facility 
                        (as defined in section 21602(e)), purchase of 
                        high-cost telecommunications technologies for 
                        the furnishing of telemedicine services that--
                                    ``(I) incur high cost per minute of 
                                usage charges; or
                                    ``(II) require consultants to be 
                                available at the same time as the 
                                patient and the referring physician.
                            ``(iii) Purchase or installation of 
                        transmission equipment or establishment or 
                        operation of a telecommunications common 
                        carrier network.
                            ``(iv) Expenditures for indirect costs (as 
                        determined by the Secretary) to the extent the 
                        expenditures would exceed more than 20 percent 
                        of the total grant funds.
                            ``(v) Construction (except for minor 
                        renovations related to the installation of 
                        equipment), or the acquisition or building of 
                        real property.
    ``(h) Reimbursement for Telemedicine Services Under the Medicare 
Program.--
            ``(1) In general.--In consultation with the Office of Rural 
        Health Policy, the Secretary shall designate 4 demonstration 
        projects that have been awarded grants under subsection (b) as 
        projects in which the Health Care Financing Administration 
        shall, in accordance with paragraph (2), reimburse providers 
        for telemedicine services furnished to--
                    ``(A) individuals who are eligible for benefits 
                under part A of title XVIII; and
                    ``(B) individuals who are eligible for benefits 
                under part A and enrolled under part B of title XVIII.
            ``(2) Development of payment methodology and payment 
        provided.--
                    ``(A) In general.--For purposes of paragraph (1), 
                the Health Care Financing Administration shall 
                reimburse a provider of telemedicine services from 
                funds made available under subsection (k) in accordance 
                with one or more methodologies to be developed by the 
                Secretary.
                    ``(B) Criteria for developing payment 
                methodologies.--In developing payment methodologies 
                under subparagraph (A), the Secretary shall--
                            ``(i) limit payment to services that would 
                        otherwise be paid for under the medicare 
                        program under title XVIII if such services were 
                        not telemedicine services;
                            ``(ii) have the discretion to develop 
                        conditions for payment that protect the health 
                        and safety of the individuals described in 
                        paragraph (1), including limiting payment for 
                        services that cannot be furnished safely as 
                        telemedicine services;
                            ``(iii) have the discretion to include 
                        appropriate payments for transmission costs in 
                        the payment methodology; and
                            ``(iv) limit payment for telemedicine 
                        consultation services to consultation services 
                        specified by the Secretary that would otherwise 
                        be paid for under the medicare program under 
                        title XVIII if the patient and practitioner had 
                        a face-to-face consultation.
    ``(i) Maintenance of Effort.--Any funds available for the 
activities covered by a demonstration project conducted under this 
section shall supplement, and shall not supplant, funds that are 
expended for similar purposes under any State, regional, or local 
program.
    ``(j) Evaluations.--Each eligible entity that conducts a 
demonstration project under this section shall submit to the Secretary 
such information and interim evaluations as the Secretary may require. 
The Secretary shall provide the Interagency Task Force on Rural 
Telemedicine with such evaluations and information submitted under the 
previous sentence as the Task Force may require to carry out its duties 
under section 21622(b).
    ``(k) Availability of Funds From Trust Fund.--Except as provided in 
part III, $20,000,000 in each of the calendar years 1995 through 1997 
shall be available for making payments under subsection (a) from the 
Infrastructure Development Account in the Health Security Trust Fund 
established under section 9551 of the Internal Revenue Code of 1986.

``SEC. 21622. FEDERAL INTERAGENCY TASK FORCE.

    ``(a) Establishment.--Not later than 90 days after the date of the 
enactment of this section, the Secretary of Health and Human Services 
shall establish a Federal interagency task force to be known as the 
`Interagency Task Force on Rural Telemedicine' (hereafter in this 
section referred to as the `Task Force').
    ``(b) Duties.--
            ``(1) In general.--The Task Force shall--
                    ``(A) identify specific uses for telemedicine that 
                have been proven to be effective to be used in the 
                evaluation of applications for federally funded 
                telemedicine demonstration projects, including any 
                application submitted under this part;
                    ``(B) review and coordinate evaluations of all 
                federally funded telemedicine and telecommunications 
                infrastructure demonstration projects, including any 
                demonstration project established under this part;
                    ``(C) establish mechanisms to facilitate a local 
                area needs assessment and consortium development 
                process to assist entities conducting federally funded 
                telemedicine demonstration projects, including 
                demonstration projects under this part; and
                    ``(D) review the policy of the Health Care 
                Financing Administration relating to reimbursement for 
                telemedicine services under the demonstration projects 
                established under section 21622(b) and designated under 
                subsection (g)(1) of such section.
            ``(2) Publication of results.--Not later than 3 years after 
        the Task Force is established, and every 3 years thereafter, 
        the Task Force shall analyze and publish a report of its 
        findings under subparagraphs (A) through (D) of paragraph (1) 
        and shall make such publications available to the Congress and 
        the general public.
    ``(c) Membership.--
            ``(1) In general.--The Task Force shall consist of 
        representatives of--
                    ``(A) the Department of Health and Human Services;
                    ``(B) the Rural Electrification Administration;
                    ``(C) the National Telecommunications Information 
                Agency;
                    ``(D) the National Institutes of Health; and
                    ``(E) other agencies and departments that have 
                responsibility for overseeing telemedicine projects.
            ``(2) Chairperson.--A representative of the Department of 
        Health and Human Services shall serve as the chairperson of the 
        Task Force.
    ``(d) Basic Pay.--Each member of the Task Force shall serve without 
pay.
    ``(e) Meetings.--The Task Force shall meet at the call of the 
chairperson.
    ``(f) Quorum.--A majority of the members shall constitute a quorum 
for the transaction of business.
    ``(g) Report on Termination of Commission.--Not later than 5 years 
after the date on which the Task Force is established, the Task Force 
shall submit to the Congress a report that evaluates the penetration of 
telemedicine in the United States and recommends whether the Task Force 
should be terminated.

           ``PART III--INSUFFICIENT AMOUNTS IN THE TRUST FUND

``SEC. 21631. INSUFFICIENT AMOUNTS IN THE TRUST FUND ACCOUNT.

    ``If the sum of the amounts specified under sections 21611(f), 
21612(e), 21613(j), and 21621(k) for a calendar year exceeds the 
amounts available for such calendar year in the Infrastructure 
Development Account in the Health Security Trust Fund established under 
section 9551 of the Internal Revenue Code of 1986, then each such 
amount shall be reduced by the amount which bears the same ratio to 
such amount as the amounts available bears to the sum of such amounts.

            ``Subtitle G--Automobile Insurance Coordination

``SEC. 21701. DEFINITIONS.

    ``In this subtitle:
            ``(1) Injured individual.--The term `injured individual' 
        means an individual who has a bodily injury or illness 
        sustained in an automobile accident and who is entitled to 
        receive automobile insurance medical services from a certified 
        standard health plan.
            ``(2) Automobile insurance medical services.--The term 
        `automobile insurance medical services' means services and 
        items covered by automobile insurance that are medically 
        necessary or appropriate for treatment of bodily injuries or 
        illnesses sustained in automobile accidents and that are within 
        the scope of the benefits to which an injured individual who is 
        enrolled in a certified standard health plan is entitled under 
        such health plan.
            ``(3) Automobile insurance carrier.--The term `automobile 
        insurance carrier' means an insurance company, employer, or 
        fund that is liable for payment for automobile insurance 
        medical services based either on a direct contractual 
        obligation to an injured individual or an obligation on behalf 
        of a person responsible for causation of an injured 
        individual's bodily injury or illness.
            ``(4) Certified standard health plan.--The term `certified 
        standard health plan' has the meaning given to such term by 
        section 21111(a)(2).

    ``PART I--REQUIREMENTS RELATING TO AUTOMOBILE INSURANCE MEDICAL 
                                SERVICES

``SEC. 21711. PROVISION OF AUTOMOBILE INSURANCE MEDICAL SERVICES 
              THROUGH HEALTH PLANS.

    ``(a) In General.--
            ``(1) Health plans.--An individual enrolled in a certified 
        standard health plan shall receive automobile insurance medical 
        services under the terms generally applicable to the provision 
        (or arrangement for the provision) of such services by such 
        health plan.
            ``(2) Medicare and medicaid.--Paragraph (1) shall not 
        prevent a participating State from requiring automobile 
        insurance carriers to make direct payment to health care 
        providers for automobile insurance medical services that are 
        covered both by (i) medicare under title XVIII or a State 
        medicaid program under title XIX, and (ii) an automobile 
        insurance contract that is required by law and provides for 
        direct payment of medical services regardless of fault. Payment 
        for automobile insurance medical services in such circumstances 
        shall be made to the extent of the automobile insurance 
        carrier's liability under the applicable contract.
    ``(b) Alternative Permitted.--Subsection (a) shall not prevent an 
individual and an automobile insurance carrier from agreeing that 
treatment for bodily injury or illness sustained in an automobile 
accident shall be provided other than by or through the certified 
standard health plan in which the individual is enrolled.

``SEC. 21712. PAYMENT FOR AUTOMOBILE INSURANCE MEDICAL SERVICES.

    ``(a) Payment to Health Plans.--Each automobile insurance carrier 
that is liable for payment for automobile insurance medical services 
provided to an injured individual by a certified standard health plan 
shall make payment to such health plan for such services to the extent 
of its obligations under the applicable automobile insurance contract.
    ``(b) Reimbursement for Cost-Sharing.--Each automobile insurance 
carrier shall be liable for the reimbursement or payment of any 
deductibles, copayments, or coinsurance paid or owed by an injured 
individual for automobile insurance medical services to the extent of 
the applicable automobile insurance contract.
    ``(c) Limitation of Liability.--Except as provided in subsections 
(a) and (b), nothing in this subtitle or any other provision of law 
shall require an automobile insurance carrier or any person insured by 
such a carrier to make any payment to a health plan, health care 
provider, or any other person for (1) automobile insurance medical 
services, or (2) other health care services or items used to treat an 
injury or illness sustained in an automobile accident that are not 
medically necessary or appropriate.
    ``(d) Use of Fee Schedules.--
            ``(1) In general.--Irrespective of the type of health plan 
        providing automobile insurance medical services, payment by 
        automobile insurance carriers for such services shall be made 
        to the plan exclusively in accordance with any fee schedule or 
        schedules established by the plan or the participating State 
        for health care services generally.
            ``(2) Medicare fee schedules.--If the injured individual is 
        a medicare beneficiary under title XVIII, an automobile 
        insurance carrier may use the appropriate fee schedule for 
        health care services established under such title.
            ``(3) Alternative payment methodologies.--Fee schedules 
        shall not be required in any case in which an automobile 
        insurance carrier and a health plan have agreed on an 
        alternative payment arrangement.
    ``(e) Reimbursement for Payments Made.--Nothing in this subtitle or 
any other provision of law shall impair the right of a certified 
standard health plan or automobile insurance carrier to seek 
reimbursement from any individual liable for a bodily injury or illness 
sustained in an automobile accident for payments made for automobile 
insurance medical services to treat such injury or illness.
    ``(f) Rights to Coverage for Additional Treatment.--Subject to the 
provisions of subsection (c), nothing in this subtitle shall impair any 
rights with respect to medically necessary or appropriate services and 
items to which an individual injured in an automobile accident is 
entitled that are not automobile insurance medical services as defined 
in this subtitle.

                       ``PART II--ADMINISTRATION

``SEC. 21721. PAYMENT FACILITATION.

    ``(a) In General.--Each participating State shall establish a 
system for payment of automobile insurance medical services by 
automobile insurance carriers to certified standard health plans, 
including mechanisms for prompt resolution of any issues or disputes 
that may arise in connection with such payment. Such systems shall 
require that automobile insurance carriers have an affirmative 
obligation to identify to such health plans the automobile insurance 
carrier or carriers liable for payment for automobile insurance medical 
services, through the use of computer data programs where appropriate 
and cost effective.
    ``(b) Sanctions.--Each participating State shall authorize 
appropriate sanctions for the failure of a health plan, automobile 
insurance carrier, or any other person to comply with the requirements 
established pursuant to subsection (a).

                 ``Subtitle H--Remedies and Enforcement

  ``PART I--REVIEW OF BENEFIT DETERMINATIONS FOR ENROLLED INDIVIDUALS

                       ``Subpart A--General Rules

``SEC. 21801. HEALTH PLAN CLAIMS PROCEDURE.

    ``(a) Definitions.--For purposes of this section:
            ``(1) Claim.--The term `claim' means a claim for payment or 
        provision of benefits under a health plan, a request for 
        preauthorization of items or services which is submitted to a 
        health plan prior to receipt of the items or services, or the 
        denial, reduction, or termination of any service or request for 
        a referral or reimbursement.
            ``(2) Individual claimant.--The term `individual claimant' 
        means, with respect to a claim, any individual who submits the 
        claim to a health plan in connection with the individual's 
        enrollment under the plan, or on whose behalf the claim is 
        submitted to the plan by a provider.
            ``(3) Provider claimant.--The term `provider claimant' 
        means, with respect to a claim, any provider who submits the 
        claim to a health plan with respect to items or services 
        provided to an individual enrolled under the plan.
    ``(b) General Rules Governing Treatment of Claims.--
            ``(1) Adequate notice of disposition of claim.--
                    ``(A) In general.--In any case in which a claim is 
                submitted in complete form to a health plan, the plan 
                shall provide to the individual claimant and any 
                provider claimant with respect to the claim a written 
                notice of the plan's approval or denial of the claim 
                within 15 days after the date of the submission of the 
                claim. The notice to the individual claimant shall be 
                written in plain and easily understood language.
                    ``(B) Denials.--In the case of a denial of the 
                claim, the notice shall--
                            ``(i) be provided within 5 days after the 
                        date of the determination to deny the claim;
                            ``(ii) set forth the specific reasons for 
                        the denial, including an explanation of such 
                        reasons and the facts underlying the decision 
                        to reduce or fail to provide services or pay 
                        the claim; and
                            ``(iii) clearly explain the right to appeal 
                        the denial under paragraph (2) and contain a 
                        description of the process for appealing such 
                        decision sufficient to allow the claimant to 
                        initiate an appeal and submit evidence to the 
                        decision maker in support of the position of 
                        the claimant.
                    ``(C) Failure to deny treated as approval.--Failure 
                by any plan to comply with the requirements of this 
                paragraph with respect to any claim submitted to the 
                plan shall be treated as approval by the plan of the 
                claim.
            ``(2) Plan's duty to review denials upon timely request.--
        The plan shall review its denial of the claim if an individual 
        claimant or provider claimant with respect to the claim submits 
        to the plan a written request for reconsideration of the claim 
        after receipt of written notice from the plan of the denial. 
        The plan shall allow any such claimant not less than 60 days, 
        after receipt of written notice from the plan of the denial, to 
        submit the claimant's request for reconsideration of the claim.
            ``(3) Time limit for review.--The plan shall complete any 
        review required under paragraph (2), and shall provide the 
        individual claimant and any provider claimant with respect to 
        the claim written notice of the plan's decision on the claim 
        after reconsideration pursuant to the review, within 30 days 
        after the date of the receipt of the request for 
        reconsideration.
            ``(4) De novo reviews.--Any review required under paragraph 
        (2)--
                    ``(A) shall be de novo,
                    ``(B) shall be conducted by an individual who did 
                not make the initial decision denying the claim and who 
                is authorized to approve the claim, and
                    ``(C) shall include review by a qualified physician 
                in the same speciality as the treating physician if the 
                resolution of any issues involved requires medical 
                expertise.
    ``(c) Treatment of Urgent Requests to Plans for Preauthorization.--
            ``(1) In general.--This subsection applies in the case of 
        any claim submitted by an individual claimant or a provider 
        claimant consisting of a request for preauthorization of items 
        or services which is accompanied by an attestation that--
                    ``(A) failure to immediately provide the items or 
                services could reasonably be expected to result in--
                            ``(i) placing the health of the individual 
                        claimant (or, with respect to an individual 
                        claimant who is a pregnant woman, the health of 
                        the woman or her unborn child) in serious 
                        jeopardy,
                            ``(ii) serious impairment to bodily 
                        functions, or
                            ``(iii) serious dysfunction of any bodily 
                        organ or part,
                or
                    ``(B) immediate provision of the items or services 
                is necessary because the individual claimant has made 
                or is at serious risk of making an attempt to harm such 
                individual claimant or another individual.
            ``(2) Shortened time limit for consideration of requests 
        for preauthorization.--Notwithstanding subsection (b)(1), a 
        health plan shall approve or deny any claim described in 
        paragraph (1) within 12 hours after submission of the claim to 
        the plan. Failure by the plan to comply with the requirements 
        of this paragraph with respect to the claim shall be treated as 
        approval by the plan of the claim.
            ``(3) Expedited exhaustion of plan remedies.--Any claim 
        described in paragraph (1) which is denied by the plan shall be 
        treated as a claim with respect to which all remedies under the 
        plan provided pursuant to this section are exhausted, 
        irrespective of any review provided under subsection (b)(2).
            ``(4) Denial of previously authorized claims not 
        permitted.--In any case in which a health plan approves a claim 
        described in paragraph (1)--
                    ``(A) the plan may not subsequently deny payment or 
                provision of benefits pursuant to the claim, unless the 
                plan makes a showing of an intentional 
                misrepresentation of a material fact by the individual 
                claimant, and
                    ``(B) in the case of a violation of subparagraph 
                (A) in connection with the claim, all remedies under 
                the plan provided pursuant to this section with respect 
                to the claim shall be treated as exhausted.
    ``(d) Time Limit for Determination of Incompleteness of Claim.--For 
purposes of this section--
            ``(1) any claim submitted by an individual claimant and 
        accepted by a provider serving under contract with a health 
        plan and any claim described in subsection (b)(1) shall be 
        treated with respect to the individual claimant as submitted in 
        complete form, and
            ``(2) any other claim for benefits under the plan shall be 
        treated as filed in complete form as of 10 days after the date 
        of the submission of the claim, unless the plan provides to the 
        individual claimant and any provider claimant, within such 
        period, a written notice of any required matter remaining to be 
        filed in order to complete the claim.
Any filing by the individual claimant or the provider claimant of 
additional matter requested by the plan pursuant to paragraph (2) shall 
be treated for purposes of this section as an initial filing of the 
claim.
    ``(e) Additional Notice and Disclosure Requirements for Health 
Plans.--In the case of a denial of a claim for benefits under a health 
plan, the plan shall include, together with the specific reasons 
provided to the individual claimant and any provider claimant under 
subsection (b)(1)--
            ``(1) if the denial is based in whole or in part on a 
        determination that the claim is for an item or service which is 
        not covered by a benefits package established under subtitle C 
        or exceeds payment rates under the plan, the factual basis for 
        the determination,
            ``(2) if the denial is based in whole or in part on 
        exclusion of coverage with respect to services because the 
        services are determined to comprise an experimental treatment 
        or investigatory procedure, the medical basis for the 
        determination and a description of the process used in making 
        the determination, and
            ``(3) if the denial is based in whole or in part on a 
        determination that the treatment is not medically necessary or 
        appropriate or is inconsistent with the plan's practice 
        guidelines, the medical basis for the determination, the 
        guidelines used in making the determination, and a description 
        of the process used in making the determination.
    ``(f) Waiver of Rights Prohibited.--A health plan may not require 
any party to waive any right under the plan or this title as a 
condition for approval of any claim under the plan, except to the 
extent otherwise specified in a formal settlement agreement.

``SEC. 21802. REVIEW IN AREA COMPLAINT REVIEW OFFICES OF GRIEVANCES 
              BASED ON ACTS OR PRACTICES BY HEALTH PLANS.

    ``(a) Complaint Review Offices.--
            ``(1) In general.--Except as provided in paragraph (2), in 
        accordance with rules which shall be prescribed by the 
        Secretary, each participating State shall establish and 
        maintain a complaint review office for each community rating 
        area established by such State to serve all enrollees of health 
        plans serving such area.
            ``(2) Multistate plans.--Under regulations of the Secretary 
        of Labor, in consultation with the Secretary, the complaint 
        review office for a community rating area established by such 
        State shall also serve as the complaint review office for 
        multistate self-insured health plans operating in the State 
        with respect to individuals who are enrolled under such plans 
        and who reside within the community rating area.
    ``(b) Filings of Complaints by Aggrieved Persons.--In the case of 
any person who is aggrieved by any act or practice engaged in by any 
health plan which consists of, or results in, denial of payment or 
provision of benefits under the plan or delay in the payment or 
provision of benefits, if the denial or delay is alleged to consist of 
a failure to comply with the terms of the plan (including the provision 
of benefits in full when due in accordance with the terms of the plan), 
or with the applicable requirements of this title, such person may file 
a complaint with the appropriate complaint review office.
    ``(c) Exhaustion of Plan Remedies.--Any complaint to which this 
section applies, including a claim to which section 21801 applies, may 
not be filed until the complainant has exhausted all remedies provided 
under the plan with respect to the claim.
    ``(d) Form of Complaint.--Any complaint to which this section 
applies shall be in writing under oath or affirmation, shall set forth 
the complaint in a manner calculated to give notice of the nature of 
the complaint, and shall contain such information as may be prescribed 
in regulations of the Secretary.
    ``(e) Notice of Filing.--The complaint review office shall serve by 
certified mail a notice of the complaint (including the date, place, 
and circumstances of the alleged violation) on the person or persons 
alleged in the complaint to have committed the violation within 10 days 
after the filing of the complaint.
    ``(f) Time Limitation.--A complaint may not be brought under this 
section with respect to any violation later than one year after the 
date on which the complaining party knows, or reasonably should have 
known, that a violation has occurred. This subsection shall not prevent 
the subsequent amending of a complaint.

``SEC. 21803. INITIAL PROCEEDINGS IN COMPLAINT REVIEW OFFICES.

    ``(a) Elections.--Whenever a complaint is brought to the complaint 
review office under section 21802(b), the complaint review office shall 
provide the complainant with an opportunity, in such form and manner as 
shall be prescribed in regulations of the Secretary, to make an 
irrevocable election:
            ``(1) To forego further proceedings in the complaint review 
        office and rely on remedies available in a court of competent 
        jurisdiction with respect to any matter in the complaint.
            ``(2) To submit the complaint as a dispute under the Early 
        Resolution Program established under subpart B and thereby 
        suspend further review proceedings under this section pending 
        termination of proceedings under the Program.
            ``(3) In any case in which an election under paragraph (1) 
        or (2) is not made, or an election under paragraph (2) was made 
        but resolution of all matters in the complaint was not obtained 
        upon termination of proceedings pursuant to the election by 
        settlement agreement or otherwise, to proceed, with the consent 
        of the plan, with the complaint to a hearing in the complaint 
        review office under section 21804 regarding the unresolved 
        matters.
    ``(b) Duty of Complaint Review Office.--The complaint review office 
shall provide (in a linguistically and culturally appropriate manner) 
an explanation to complainants bringing complaints to the office 
concerning the legal and other ramifications of each option available 
under this section.
    ``(c) Effect of Participation in Early Resolution Program.--Any 
matter in a complaint brought to the complaint review office which is 
included in a dispute which is timely submitted to the Early Resolution 
Program established under subpart B shall not be assigned to a hearing 
under section 21804 unless the proceedings under the Program with 
respect to the dispute are terminated without settlement or resolution 
of the dispute with respect to such matter. Upon termination of any 
proceedings regarding a dispute submitted to the Program, the 
applicability of this section to any matter in a complaint which was 
included in the dispute shall not be affected by participation in the 
proceedings, except to the extent otherwise required under the terms of 
any settlement agreement or other formal resolution obtained in the 
proceedings.

``SEC. 21804. HEARINGS BEFORE HEARING OFFICERS IN COMPLAINT REVIEW 
              OFFICES.

    ``(a) Hearing Process.--
            ``(1) Assignment of complaints to hearing officers and 
        notice to parties.--
                    ``(A) In general.--In the case of an election under 
                section 21803(a)(3)--
                            ``(i) the complaint review office shall 
                        assign the complaint, and each motion in 
                        connection with the complaint, to a hearing 
                        officer employed by the participating State in 
                        the office; and
                            ``(ii) the hearing officer shall have the 
                        power to issue and cause to be served upon the 
                        plan named in the complaint a copy of the 
                        complaint and a notice of hearing before the 
                        hearing officer at a place fixed in the notice, 
                        not less than 5 days after the serving of the 
                        complaint.
                    ``(B) Qualifications for hearing officers.--No 
                individual may serve in a complaint review office as a 
                hearing officer unless the individual meets standards 
                which shall be prescribed by the Secretary. Such 
                standards shall include experience, training, ability 
                to communicate with the enrollee, affiliations, 
                diligence, absence of actual or potential conflicts of 
                interest, and other qualifications deemed relevant by 
                the Secretary. At no time shall a hearing officer have 
                any official, financial, or personal conflict of 
                interest with respect to issues in controversy before 
                the hearing officer.
            ``(2) Amendment of complaints.--Upon the motion of the 
        complainant, any complaint may, at the discretion of the 
        hearing officer conducting the hearing, be amended at any time 
        prior to the issuance of an order based thereon.
            ``(3) Answers.--The party against whom the complaint is 
        filed shall have the right to file an answer to the original or 
        amended complaint and to appear in person or otherwise and give 
        testimony at the place and time fixed in the complaint.
    ``(b) Additional Parties.--In the discretion of the hearing officer 
conducting the hearing, any other person may be allowed to intervene in 
the proceeding and to present testimony.
    ``(c) Hearings.--
            ``(1) De novo hearing.--Each hearing officer shall hear 
        complaints and motions de novo.
            ``(2) Testimony.--The testimony taken by the hearing 
        officer shall be reduced to writing. Thereafter, the hearing 
        officer, in the officer's discretion, may (after notice to the 
        parties) provide for the taking of further testimony or the 
        hearing of arguments.
            ``(3) Authority of hearing officers.--
                    ``(A) In general.--The hearing officer may compel 
                by subpoena the attendance of witnesses and the 
                production of evidence at any designated place or 
                hearing. In case of contumacy or refusal to obey a 
                subpoena lawfully issued under this paragraph and upon 
                application of the hearing officer, an appropriate 
                district court of the United States may issue an order 
                requiring compliance with the subpoena and any failure 
                to obey the order may be punished by the court as a 
                contempt thereof. The hearing officer may also seek 
                enforcement of the subpoena in a State court of 
                competent jurisdiction.
                    ``(B) Expert witnesses.--The hearing officer may 
                use independent medical experts.
            ``(4) Rules of evidence.--Formal rules of evidence shall 
        apply to any hearing under this section.
            ``(5) Expedited hearings.--Notwithstanding section 21803 
        and the preceding provisions of this section, upon receipt of a 
        complaint containing a claim described in section 21801(c)(1), 
        the complaint review office shall promptly provide the 
        complainant with the opportunity to make an election under 
        section 21803(a)(3) and assignment to a hearing on the 
        complaint before a hearing officer. The complaint review office 
        shall ensure that such a hearing commences not later than 24 
        hours after receipt of the complaint by the complaint hearing 
        office and not later than 3 days after the receipt of a 
        complaint, the complaint review office shall provide a 
        decision.
    ``(d) Decision of Hearing Officer.--
            ``(1) In general.--Except as provided in subsection (c)(4), 
        not later than 120 days after the date on which a complaint is 
        assigned under this section, the hearing officer shall decide 
        if the preponderance of the evidence justifies the denial of 
        services and whether to decide in favor of the complainant with 
        respect to each alleged act or practice. Each such decision--
                    ``(A) shall include the hearing officer's findings 
                of fact, and
                    ``(B) shall constitute the hearing officer's final 
                disposition of the proceedings.
            ``(2) Decisions finding in favor of complainant.--If the 
        hearing officer's decision includes a determination that any 
        party named in the complaint has engaged in or is engaged in an 
        act or practice which consists of, or results in, a denial or 
        delay described in section 21802(b), the hearing officer shall 
        issue and cause to be served on such party an order which 
        requires such party--
                    ``(A) to cease and desist from such act or 
                practice,
                    ``(B) to provide the benefits due under the terms 
                of the plan and to otherwise comply with the terms of 
                the plan and the applicable requirements of this title,
                    ``(C) to pay to the complainant prejudgment 
                interest on the actual costs incurred in obtaining the 
                items and services at issue in the complaint,
                    ``(D) to pay to the prevailing complainant a 
                reasonable attorney's fee, reasonable expert witness 
                fees, and other reasonable costs and expenses relating 
                to the hearing on the charges on which the complainant 
                prevails, and
                    ``(E) to provide other appropriate relief.
            ``(3) Decisions not in favor of complainant.--If the 
        hearing officer's decision includes a determination that the 
        party named in the complaint has not engaged in or is not 
        engaged in an act or practice referred to in section 21802(b), 
        the hearing officer--
                    ``(A) shall include in the decision a dismissal of 
                the charge in the complaint relating to the act or 
                practice, and
                    ``(B) upon a finding that such charge is frivolous, 
                shall issue and cause to be served on the complainant 
                an order which requires the complainant to pay to such 
                party a reasonable attorney's fee, reasonable expert 
                witness fees, and other reasonable costs and expenses 
                relating to the proceedings on such charge.
            ``(4) Submission and service of decisions.--The hearing 
        officer shall submit each decision to the complaint review 
        office at the conclusion of the proceedings and the office 
        shall cause a copy of the decision to be served on the parties 
        to the proceedings.
    ``(e) Review.--
            ``(1) In general.--The decision of the hearing officer 
        shall be final and binding upon all parties. Except as provided 
        in paragraph (2), any party to the complaint may, within 30 
        days after service of the decision by the complaint review 
        office, file an appeal of the decision with the State Health 
        Plan Review Board established under section 21805 in such form 
        and manner as may be prescribed by such Board.
            ``(2) Exception.--A decision in favor of the complainant in 
        the case of an expedited hearing under subsection (c)(4) shall 
        not be subject to review.
    ``(f) Court Enforcement of Orders.--
            ``(1) In general.--If a decision of the hearing officer in 
        favor of the complainant is not appealed under section 21805, 
        the complainant may petition any court of competent 
        jurisdiction for enforcement of the order. In any such 
        proceeding, the order of the hearing officer shall not be 
        subject to review.
            ``(2) Awarding of costs.--In any action for court 
        enforcement under this subsection, a prevailing complainant 
        shall be entitled to a reasonable attorney's fee, reasonable 
        expert witness fees, and other reasonable costs and expenses 
        relating to such action.

``SEC. 21805. REVIEW BY STATE HEALTH PLAN REVIEW BOARD.

    ``(a) Establishment and Membership.--Each participating State shall 
establish a State Health Plan Review Board (hereafter in this subtitle 
referred to as the `Review Board'). The Review Board shall be composed 
of individuals who by reason of training, education, or experience are 
qualified to carry out the functions of the Review Board under this 
subtitle, and who fairly represent all interested parties. The State 
shall prescribe such rules as are necessary for the orderly transaction 
of proceedings by the Review Board. Every official act of the Review 
Board shall be entered of record, and its hearings and records shall be 
open to the public consistent with State law regarding individual 
privacy rights and the confidentiality of medical records subject to 
the proceedings.
    ``(b) Review Process.--The Review Board shall ensure that 
reasonable notice is provided for each appeal before the Review Board 
of a hearing officer's decision under section 21804, and shall provide 
for the orderly consideration of arguments by any party to the hearing 
upon which the hearing officer's decision is based. In the discretion 
of the Review Board, any other person may be allowed to intervene in 
the proceeding and to present written argument. The Secretary (or in 
the case of multistate self-insured health plans, the Secretary of 
Labor) may intervene in the proceeding as a matter of right.
    ``(c) Scope of Review.--The Review Board shall review the decision 
of the hearing officer from which the appeal is made, except that the 
review shall be only for the purposes of determining--
            ``(1) whether the determination is supported by substantial 
        evidence on the record considered as a whole,
            ``(2) in the case of any interpretation by the hearing 
        officer of contractual terms (irrespective of the extent to 
        which extrinsic evidence was considered), whether the 
        determination is supported by a preponderance of the evidence,
            ``(3) whether the determination is in excess of statutory 
        jurisdiction, authority, or limitations, or is in violation of 
        a statutory right, or
            ``(4) whether the determination is without observance of 
        procedure required by law.
    ``(d) Decision of Review Board.--The decision of the hearing 
officer as affirmed or modified by the Review Board (or any reversal by 
the Review Board of the hearing officer's final disposition of the 
proceedings) shall become the final order of the Review Board and 
binding on all parties, subject to review under subsection (e). The 
Review Board shall cause a copy of its decision to be served on the 
parties to the proceedings not later than 5 days after the date of the 
decision.
    ``(e) Review of Final Orders.--
            ``(1) In general.--Not later than 60 days after the entry 
        of the final order, any person aggrieved by any such final 
        order may seek a review of the order under State procedures.
            ``(2) Enforcement decree in original review.--If, upon 
        appeal of an order under paragraph (1), the order is not 
        reversed, the court shall have the jurisdiction to make and 
        enter a decree enforcing the order of the Review Board.
    ``(f) Awarding of Attorneys' Fees and Other Costs and Expenses.--In 
any proceeding before the Review Board under this section or any 
judicial proceeding under subsection (e), the Review Board or the court 
(as the case may be) shall award to a prevailing complainant a 
reasonable attorney's fee, reasonable expert witness fees, and other 
reasonable costs and expenses relating to the causes on which the 
complainant prevails.

``SEC. 21806. CIVIL MONEY PENALTIES.

    ``(a) Denial or Delay in Payment or Provision of Benefits.--The 
Secretary (or in the case of a multistate self-insured health plan, the 
Secretary of Labor) may assess a civil penalty against any health plan 
for unreasonable denial or delay in the payment or provision of 
benefits thereunder, in an amount not to exceed--
            ``(1) $25,000 per violation, or $75,000 per violation in 
        the case of a finding of bad faith on the part of the plan, and
            ``(2) in the case of a finding of a pattern or practice of 
        such violations engaged in by the plan, $1,000,000 in addition 
        to the total amount of penalties assessed under paragraph (1) 
        with respect to such violations.
For purposes of paragraph (1), each violation with respect to any 
single individual shall be treated as a separate violation.
    ``(b) Civil Action To Enforce Civil Penalty.--The Secretary may 
commence a civil action in any court of competent jurisdiction to 
enforce a civil penalty assessed under subsection (a).
    ``(c) Supplemental Plans.--Nothing in this section shall be 
construed to limit the rights and remedies available under State law 
with respect to supplemental health benefits plans.

                 ``Subpart B--Early Resolution Programs

``SEC. 21811. ESTABLISHMENT OF EARLY RESOLUTION PROGRAMS IN COMPLAINT 
              REVIEW OFFICES.

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

``SEC. 21812. INITIATION OF PARTICIPATION IN MEDIATION PROCEEDINGS.

    ``(a) Eligibility of Cases for Submission to Early Resolution 
Program.--A dispute may be submitted to the Early Resolution Program 
only if the following requirements are met with respect to the dispute:
            ``(1) Nature of dispute.--The dispute consists of--
                    ``(A) an assertion by an individual enrolled under 
                a health plan of one or more claims against the health 
                plan for payment or provision of benefits, based on 
                alleged coverage under the plan; and
                    ``(B) a denial by the plan of the claims or 
                appropriate reimbursement based on the claims.
            ``(2) Nature of disputed claim.--Each claim consists of--
                    ``(A) a claim for payment or provision of benefits 
                under the plan; or
                    ``(B) a request for information or documents the 
                disclosure of which is required under this title 
                (including claims of entitlement to disclosure based on 
                colorable claims to rights to benefits under the plan).
    ``(b) Filing of Election.--A complainant with a dispute which is 
eligible for submission to the Early Resolution Program may make the 
election under section 21803(a)(2) to submit the dispute to mediation 
proceedings under the Program not later than 15 days after the date the 
complaint is filed with the complaint review office under section 
21802(b).
    ``(c) Agreement To Participate.--
            ``(1) Election by claimant.--A complainant may elect 
        participation in the mediation proceedings only by entering 
        into a written participation agreement (including an agreement 
        to comply with the rules of the Program and consent for the 
        complaint review office to contact the health plan regarding 
        the agreement), and by releasing plan records to the Program 
        for the exclusive use of the facilitator assigned to the 
        dispute.
            ``(2) Participation by plans or health benefits 
        contractors.--Each party whose participation in the mediation 
        proceedings has been elected by a claimant pursuant to 
        paragraph (1) shall participate in, and cooperate fully with, 
        the proceedings. The claims review office shall provide such 
        party with a copy of the participation agreement described in 
        paragraph (1), together with a written description of the 
        Program. Such party shall submit the copy of the agreement, 
        together with its authorized signature signifying receipt of 
        notice of the agreement, to the claims review office, and shall 
        include in the submission to the claims review office a copy of 
        the written record of the plan claims procedure completed 
        pursuant to section 21801 with respect to the dispute and all 
        relevant plan documents. The relevant documents shall include 
        all documents under which the plan is or was administered or 
        operated, including copies of any insurance contracts under 
        which benefits are or were provided and any fee or 
        reimbursement schedules for health care providers.

``SEC. 21813. MEDIATION PROCEEDINGS.

    ``(a) Role of Facilitator.--In the course of mediation proceedings 
under the Early Resolution Program, the facilitator assigned to the 
dispute shall prepare the parties for a conference regarding the 
dispute and serve as a neutral mediator at such conference, with the 
goal of achieving settlement of the dispute.
    ``(b) Preparations for Conference.--In advance of convening the 
conference, the facilitator shall, after identifying the necessary 
parties and confirming that the case is eligible for the Program, 
analyze the record of the claims procedure conducted pursuant to 
section 21801 and any position papers submitted by the parties to 
determine if further case development is needed to clarify the legal 
and factual issues in dispute, and whether there is any need for 
additional information and documents.
    ``(c) Conference.--Upon convening the conference, the facilitator 
shall assist the parties in identifying undisputed issues and exploring 
settlement. If settlement is reached, the facilitator shall assist in 
the preparation of a written settlement agreement. If no settlement is 
reached, the facilitator shall present the facilitator's evaluation, 
including an assessment of the parties' positions, the likely outcome 
of further administrative action or litigation, and suggestions for 
narrowing the issues in dispute.
    ``(d) Time Limit.--The facilitator shall ensure that mediation 
proceedings with respect to any dispute under the Early Resolution 
Program shall be completed within 120 days after the election to 
participate. The parties may agree to one extension of the proceedings 
by not more than 30 days if the proceedings are suspended to obtain an 
agency ruling or to reconvene the conference in a subsequent session.
    ``(e) Inapplicability of Formal Rules.--Formal rules of evidence 
shall not apply to mediation proceedings under the Early Resolution 
Program. All statements made and evidence presented in the proceedings 
shall be admissible in the proceedings. The facilitator shall be the 
sole judge of the proper weight to be afforded to each submission. The 
parties to mediation proceedings under the Program shall not be 
required to make statements or present evidence under oath.
    ``(f) Representation.--Parties may participate pro se or be 
represented by attorneys throughout the proceedings of the Early 
Resolution Program.
    ``(g) Confidentiality.--
            ``(1) In general.--Under regulations of the Secretary, 
        rules similar to the rules under section 574 of title 5, United 
        States Code (relating to confidentiality in dispute resolution 
        proceedings), shall apply to the mediation proceedings under 
        the Early Resolution Program.
            ``(2) Civil remedies.--The Secretary may assess a civil 
        penalty against any person who discloses information in 
        violation of the regulations prescribed pursuant to paragraph 
        (1) in the amount of three times the amount of the claim 
        involved. The Secretary may bring a civil action to enforce 
        such civil penalty in any court of competent jurisdiction.

``SEC. 21814. LEGAL EFFECT OF PARTICIPATION IN MEDIATION PROCEEDINGS.

    ``(a) Process Nonbinding.--Findings and conclusions made in the 
mediation proceedings of the Early Resolution Program shall be treated 
as advisory in nature and nonbinding. Except as provided in subsection 
(b), the rights of the parties under subpart A shall not be affected by 
participation in the Program.
    ``(b) Resolution Through Settlement Agreement.--If a case is 
settled through participation in mediation proceedings under the 
Program, the facilitator shall assist the parties in drawing up an 
agreement which shall constitute, upon signature of the parties, a 
binding contract between the parties which is enforceable under section 
21815.
    ``(c) Preservation of Rights of Non-Parties.--The settlement 
agreement shall not have the effect of waiving or otherwise affecting 
any rights to review under subpart A, or any other right under this 
subtitle or the plan, with respect to any person who is not a party to 
the settlement agreement.

``SEC. 21815. ENFORCEMENT OF SETTLEMENT AGREEMENTS.

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

                          ``Subpart C--Funding

``SEC. 21816. AVAILABILITY OF TRUST FUND AMOUNTS.

    ``(a) In General.--There shall be available $100,000,000 in fiscal 
1995, $150,000,000 in each of the fiscal years 1996 through 1998, and 
$100,000,000 in each of the fiscal years 1999 through 2004 from the 
Health Security Trust Fund established under section 9551 of the 
Internal Revenue Code of 1986 to the Secretary to support participating 
States that have submitted applications in accordance with subsection 
(b) to establish and maintain complaint review systems and early 
resolution programs. The Secretary shall develop a formula for 
determining the appropriate awarding of funds to participating States 
submitting such applications.
    ``(b) Application.--For purposes of subsection (a), an application 
is in accordance with this subsection if the applicant submits the 
application to the Secretary at such time, in such manner, and 
containing such information and assurances as the Secretary may 
reasonably require.

       ``PART II--ADDITIONAL REMEDIES AND ENFORCEMENT PROVISIONS

``SEC. 21821. CIVIL ENFORCEMENT.

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

``SEC. 21822. FACIAL CONSTITUTIONAL CHALLENGES.

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

``SEC. 21823. TREATMENT OF PLANS AS PARTIES IN CIVIL ACTIONS.

    ``A health plan may sue or be sued under this title as an entity.

``SEC. 21824. GENERAL NONPREEMPTION OF RIGHTS AND REMEDIES.

    ``Nothing in this subtitle shall be construed to deny, impair, or 
otherwise adversely affect a right or remedy available under law to any 
person, except to the extent the right or remedy is inconsistent with 
this subtitle.

``SEC. 21825. NONDISCRIMINATION IN FEDERALLY ASSISTED PROGRAMS.

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

         Subtitle B--Coordination With Other Provisions of Law

SEC. 111. MCCARRAN-FERGUSON REFORM.

    (a) In General.--Section 3 of the Act of March 9, 1945 (15 U.S.C. 
1013), known as the McCarran-Ferguson Act, is amended by adding at the 
end the following:
    ``(c) Notwithstanding that the business of insurance is regulated 
by State law, nothing in this Act shall limit the applicability of the 
following Acts to the business of insurance to the extent that such 
business relates to the provision of health benefits:
            ``(1) The Sherman Act (15 U.S.C. 1 et seq.).
            ``(2) The Clayton Act (15 U.S.C. 12 et seq.).
            ``(3) Federal Trade Commission Act (15 U.S.C. 41 et seq.).
            ``(4) The Act of June 19, 1936 (49 Stat. 1526; 15 U.S.C. 
        21a et seq.), known as the Robinson-Patman Antidiscrimination 
        Act.''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
take effect with respect to causes of action arising on or after 
January 1, 1996.

SEC. 112. OFFICE OF RURAL HEALTH POLICY.

    (a) Appointment of Assistant Secretary.--
            (1) In general.--Section 711(a) of the Social Security Act 
        (42 U.S.C. 912(a)) is amended--
                    (A) by striking ``by a Director, who shall advise 
                the Secretary'' and inserting ``by an Assistant 
                Secretary for Rural Health (in this section referred to 
                as the `Assistant Secretary'), who shall report 
                directly to the Secretary''; and
                    (B) by adding at the end the following new 
                sentence: ``The Office shall not be a component of any 
                other office, service, or component of the 
                Department.''.
            (2) Conforming amendments.--(A) Section 711(b) of the 
        Social Security Act (42 U.S.C. 912(b)) is amended by striking 
        ``the Director'' and inserting ``the Assistant Secretary''.
            (B) Section 338J(a) of the Public Health Service Act (42 
        U.S.C. 254r(a)) is amended by striking ``Director of the Office 
        of Rural Health Policy'' and inserting ``Assistant Secretary 
        for Rural Health''.
            (C) Section 464T(b) of the Public Health Service Act (42 
        U.S.C. 285p-2(b)) is amended in the matter preceding paragraph 
        (1) by striking ``Director of the Office of Rural Health 
        Policy'' and inserting ``Assistant Secretary for Rural 
        Health''.
            (D) Section 6213 of the Omnibus Budget Reconciliation Act 
        of 1989 (42 U.S.C. 1395x note) is amended in subsection (e)(1) 
        by striking ``Director of the Office of Rural Health Policy'' 
        and inserting ``Assistant Secretary for Rural Health''.
            (E) Section 403 of the Ryan White Comprehensive AIDS 
        Resources Emergency Act of 1990 (42 U.S.C. 300ff-11 note) is 
        amended in the matter preceding paragraph (1) of subsection (a) 
        by striking ``Director of the Office of Rural Health Policy'' 
        and inserting ``Assistant Secretary for Rural Health''.
            (3) Amendment to the executive schedule.--Section 5315 of 
        title 5, United States Code, is amended by striking ``Assistant 
        Secretaries of Health and Human Services (5)'' and inserting 
        ``Assistant Secretaries of Health and Human Services (6)''.
    (b) Expansion of Duties.--Section 711(a) of the Social Security Act 
(42 U.S.C. 912(a)) is amended by striking ``and access to (and the 
quality of) health care in rural areas'' and inserting ``access to, and 
quality of, health care in rural areas, and reforms to the health care 
system and the implications of such reforms for rural areas''.
    (c) Effective Date.--The amendments made by this section shall take 
effect on January 1, 1996.

SEC. 113. AMENDMENTS TO THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 
              1974.

    (a) Reporting and Disclosure Requirements Applicable to Group 
Health Plans.--
            (1) In general.--Part 1 of subtitle B of title I of such 
        Act is amended--
                    (A) in the heading for section 110, by adding ``by 
                pension plans'' at the end;
                    (B) by redesignating section 111 as section 112; 
                and
                    (C) by inserting after section 110 the following 
                new section:

                 ``special rules for group health plans

    ``Sec. 111. (a) In General.--The Secretary may by regulation 
provide special rules for the application of this part to group health 
plans which are consistent with the purposes of this title and the 
Health Security Act and which take into account the special needs of 
participants, beneficiaries, and health care providers under such 
plans.
    ``(b) Expeditious Reporting and Disclosure.--Such special rules may 
include rules providing for--
            ``(1) reductions in the periods of time referred to in this 
        part,
            ``(2) increases in the frequency of reports and disclosures 
        required under this part, and
            ``(3) such other changes in the provisions of this part as 
        may result in more expeditious reporting and disclosure of plan 
        terms and changes in such terms to the Secretary and to plan 
        participants and beneficiaries,
to the extent that the Secretary determines that the rules described in 
this subsection are necessary to ensure timely reporting and disclosure 
of information consistent with the purposes of this part and the Health 
Security Act as they relate to group health plans.
    ``(c) Group Health Plan.--For purposes of this section, the term 
`group health plan' means an employee welfare benefit plan which 
provides medical care (as defined in section 213(d) of the Internal 
Revenue Code of 1986) to participants or beneficiaries directly or 
through insurance, reimbursement, or otherwise.''
            (2) Clerical amendment.--The table of contents in section 1 
        of such Act is amended by striking the items relating to 
        sections 110 and 111 and inserting the following new items:

``Sec. 110. Alternative methods of compliance by pension plans.
``Sec. 111. Special rules for group health plans.
``Sec. 112. Repeal and effective date.''
    (b) Coordination With Health Security Act.--
            (1) Enforcement.--Section 502(a)(1)(B) of the Employee 
        Retirement Income Security Act of 1974 (29 U.S.C. 
        1132(a)(1)(B)) is amended by inserting ``except in the case of 
        an action by any participant, beneficiary, or fiduciary to 
        which subtitle H of title XXI of the Social Security Act 
        applies,'' before ``to recover''.
            (2) Preemption of state laws.--Section 514(b) of such Act 
        (29 U.S.C. 1144(b)) is amended by adding at the end the 
        following new paragraph:
            ``(9) Subsection (a) shall not apply to any law of any 
        State which implements a State single-payer system under part 
        II of subtitle A of title XXI of the Social Security Act.''
    (c) Repeal of Multiple Employer Welfare Arrangements.--
            (1) In general.--Paragraph (40) of section 3 of the 
        Employee Retirement Income Security Act of 1974 (29 U.S.C. 
        1002(40)) is repealed.
            (2) Conforming amendment.--Paragraph (6) of section 514(b) 
        of such Act (29 U.S.C. 1144(b)(6)) is repealed.
    (d) Effective Date.--The amendments made by this section shall take 
effect on January 1, 1996.

                           TITLE II--COVERAGE

SEC. 201. COVERAGE.

    The Social Security Act, as amended by section 101, is amended by 
adding at the end the following new title:

                         ``TITLE XXII--COVERAGE

                          ``table of contents

``Sec. 2201. National Health Care Commission.
``Sec. 2202. Duties of Commission.
``Sec. 2203. Congressional consideration of Commission recommendations.
``Sec. 2204. Operation of the Commission.

``SEC. 2201. NATIONAL HEALTH CARE COMMISSION.

    ``There is established a commission to be known as the National 
Health Care Commission (in this title referred to as the `Commission').

``SEC. 2202. DUTIES OF COMMISSION.

    ``(a) In General.--The general duties of the Commission are to 
monitor and respond to--
            ``(1) trends in health insurance coverage; and
            ``(2) changes in per-capita premiums and other indicators 
        of health care inflation.
The Commission may be advised by individuals with expertise concerning 
the economic, demographic, and insurance market factors that affect the 
cost and availability of health insurance.
    ``(b) Biennial Reports.--
            ``(1) In general.--The Commission shall report to Congress 
        biennially on January 1 (beginning in 1996) on the status of 
        health insurance coverage in the nation and the national goal 
        of universal coverage.
            ``(2) Health insurance coverage.--For purposes of this 
        title, the term `health insurance coverage' means coverage 
        under--
                    ``(A) a certified standard health plan providing a 
                standard benefits package or an alternative standard 
                benefits package;
                    ``(B) the medicare program under title XVIII;
                    ``(C) the medicaid program under title XIX;
                    ``(D) the health care program for active military 
                personnel under title 10, United States Code;
                    ``(E) the veterans health care program under 
                chapter 17 of title 38, United States Code;
                    ``(F) the Civilian Health and Medical Program of 
                the Uniformed Services (CHAMPUS), as defined in section 
                1073(4) of title 10, United States Code;
                    ``(G) the Indian health service program under the 
                Indian Health Care Improvement Act (25 U.S.C. 1601 et 
                seq.);
                    ``(H) a State single-payer system approved by the 
                Secretary under section 21031; or
                    ``(I) any governmental health care program for 
                institutionalized individuals.
            ``(3) Contents of report.--Each biennial report shall 
        include the structure and performance measures of every 
        community rating area, including the following:
                    ``(A) Demographics of the uninsured individuals, 
                and findings on why such individuals are uninsured.
                    ``(B) Structure of delivery systems.
                    ``(C) Number and organizational form of certified 
                standard health plans described in paragraph (2)(A).
                    ``(D) Level of enrollment in such certified 
                standard health plans.
                    ``(E) State implementation of responsibilities, 
                including establishment of community rating areas, 
                under title XXI.
                    ``(F) Status of insurance reforms.
                    ``(G) Development of purchasing cooperatives and 
                other buyer reforms.
                    ``(H) Success of market and other mechanisms of 
                controlling health expenditures and premium costs in 
                the community rating areas and nationally.
                    ``(I) Status of medicaid-eligible individuals under 
                the medicaid program under title XIX, the integration 
                of such individuals into coverage by certified standard 
                health plans providing standard benefits packages, and 
                the transition of such program toward managed care.
                    ``(J) Adequacy of subsidies for individuals under 
                part B of title XIX.
                    ``(K) Status of medicare-eligible individuals under 
                the medicare program under title XVIII, the integration 
                of such individuals into coverage by certified standard 
                health plans providing standard benefits packages, and 
                the transition of such program into medicare risk 
                contracts.
                    ``(L) Coverage progress among individuals who are 
                employed, including status and level of voluntary 
                employer contributions and participation rates in 
                purchasing cooperatives and among large employers.
                    ``(M) Percentage of individuals who are enrolled in 
                certified standard health plans described in paragraph 
                (2)(A), separated into categories of medicare-eligible 
                individuals, medicaid-eligible individuals, employed 
                individuals, and individuals eligible for subsidies.
                    ``(N) Recommendations, specific to each community 
                rating area, on how the area might increase coverage 
                among the residents and further moderate growth in 
                premiums.
            ``(4) Prohibited activity.--In carrying out its duties, 
        including the preparation of any biennial report, the 
        Commission may not address issues related to defining an 
        employee for tax purposes, including discussing such issues 
        with the Internal Revenue Service or the Department of the 
        Treasury.
    ``(c) Coverage Trigger.--
            ``(1) In general.--In the event the Commission determines 
        that health insurance coverage of at least 95 percent of the 
        resident population in the United States will not be attained 
        by 2002, the Commission shall submit recommendations in its 
        biennial report to Congress on January 1, 2002.
            ``(2) Recommendation requirements.--
                    ``(A) In general.--The recommendations of the 
                Commission shall include methods to reach 95 percent 
                health insurance coverage in community rating areas 
                that have failed to meet that target. Such 
                recommendations shall address all relevant parties, 
                including States, employers, employees, unemployed and 
                low-income individuals, and public program 
                participants.
                    ``(B) Required separate recommendations.--In 
                addition to any other recommendations the Commission 
                submits, the Commission shall make separate 
                recommendations on the following:
                            ``(i) A schedule of assessments or 
                        contribaaaaaaaautions to encourage employers 
                        who are not doing so to purchase coverage for 
                        their employees.
                            ``(ii) A method of encouraging full 
                        coverage which does not require any assessments 
                        on or contributions from employers.
                            ``(iii) Possible adjustments to the 
                        actuarial value of any of the benefits packages 
                        described in subsection (b)(2)(A).
                            ``(iv) Possible adjustments to subsidies 
                        under part B of title XIX.
                            ``(v) Possible adjustments to the tax 
                        treatment of health benefits.
                The Commission shall inform the National Health 
                Benefits Board of any recommendations relating to 
                clause (iii).
            ``(3) Implementing bill.--The Commission shall submit to 
        the Congress an implementing bill which contains such statutory 
        provisions as the Commission determines are necessary or 
        appropriate to implement the recommendations developed under 
        this subsection.
    ``(d) Definitions.--For purposes of aythis title--
            ``(1) Alternative standard benefits package.--The term 
        `alternative standard benefits package' means the alternative 
        standard benefits package established under subtitle C of title 
        XXI.
            ``(2) Certified standard health plan.--The term `certified 
        standard health plan' has the meaning given such term by 
        section 21011(a)(2).
            ``(3) Community rating area.--The term `community rating 
        area' means an area established under section 21021.
            ``(4) Purchasing cooperative.--The term `purchasing 
        cooperative' has the meaning given such term by section 
        21100(14).
            ``(5) Resident population.--The term `resident population' 
        includes any individual who is residing in the United States 
        and who is--
                    ``(A) a citizen or national of the United States; 
                or
                    ``(B) an alien permanently residing in the United 
                States under color of law (as defined in section 
                1958(4)(C)).
            ``(6) Standard benefits package.--The term `standard 
        benefits package' means the standard benefits package 
        established under subtitle C of title XXI.
            ``(7) United states.--The term `United States' means the 
        various States (as defined in section 21100(16)).

``SEC. 2203. CONGRESSIONAL CONSIDERATION OF COMMISSION RECOMMENDATIONS.

    ``(a) In General.--An implementing qbill described in section 
2202(c)(3) shall be considered by Congress under the procedures for 
consideration described in subsection (b).
    ``(b) Congressional Consideration.--
            ``(1) Rules of house of representatives and senate.--This 
        subsection is enacted by Congress--
                    ``(A) as an exercise of the rulemaking power of the 
                House of Representatives and the Senate, respectively, 
                and as such is deemed a part of the rules of each 
                House, respectively, but applicable only with respect 
                to the procedure to be followed in that House in the 
                case of an implementing bill described in subsection 
                (a), and supersedes other rules only to the extent that 
                such rules are inconsistent therewith; and
                    ``(B) with full recognition of the constitutional 
                right of either House to change the rules (so far as 
                relating to the procedure of that House) at any time, 
                in the same manner and to the same extent as in the 
                case of any other rule of that House.
            ``(2) Introduction and referral.--On the day on which the 
        implementing bill described in subsection (as) is transmitted 
        to the House of Representatives and the Senate, such bill shall 
        be introduced (by request) in the House of Representatives by 
        the majority leaderyay of the House, for himself or herself, 
        and the minority leader of the House, or by Members of the 
        House designated by the majority leader and minority leader of 
        the House and shall be introduced (by request) in the Senate by 
        the majority leader of the Senate, for himself or herself, and 
        the minority leader of the Senate, or by Members of the Senate 
        designated by the majority leader and minority leader of the 
        Senate. If either House is not in session on the day on which 
        the implementing bill is transmitted, the bill shall be 
        introduced in that House, as provided in the preceding 
        sentence, on the first day thereafter on which that House is in 
        session. If the implementing bill is not introduced within 5 
        days of its transmission, any Member of the House and of the 
        Senate may introduce such bill. The implementing bill 
        introduced in the House of Representatives and the Senate shall 
        be referred to the appropriate committees of each House.
            ``(3) Period for committee consideration.--If the committee 
        or committees of either House to which an implementing bill has 
        been referred have not reported the bill at the close of July 
        1, 2002 (or if such House is not in session, the next day such 
        House is in session), such committee or committees shall be 
        automatically discharged from further consideration of the 
        implementing bill and it shall be placed on the appropriate 
        calendar.
            ``(4) Floor consideration in the senate.--
                    ``(A) In general.--Within 5 days after the 
                implementing bill is placed on the calendar, the 
                majority leader, at a time to be determined by the 
                majority leader in consultation with the minority 
                leader, shall proceed to the consideration of the bill. 
                If on the sixth day after the bill is placed on the 
                calendar, the Senate has not proceeded to consideration 
                of the bill, then the presiding officer shall 
                automatically place the bill before the Senate for 
                consideration. A motion in the Senate to proceed to the 
                consideration of an implementing bill shall be 
                privileged and not debatable. An amendment to the 
                motion shall not be in order, nor shall it be in order 
                to move to reconsider the vote by which the motion is 
                agreed to or disagreed to.
                    ``(B) Time limitation on consideration of bill.--
                            ``(i) In general.--Debate in the Senate on 
                        an implementing bill, and all amendments and 
                        debatable motions and appeals in connection 
                        therewith, shall be limited to not more than 30 
                        hours. The time shall be equally divided 
                        between, and controlled by, the majority leader 
                        and the minority leader or their designees.
                            ``(ii) Debate of amendments, motions, 
                        points of order, and appeals.--In the Senate, 
                        no amendment which is not relevant to the bill 
                        shall be in order. Debate in the Senate on any 
                        amendment, debatable motion or appeal, or point 
                        of order in connection with an implementing 
                        bill shall be limited to--
                                    ``(I) not more than 2 hours for 
                                each first degree relevant amendment,
                                    ``(II) one hour for each second 
                                degree relevant amendment, and
                                    ``(III) 30 minutes for each 
                                debatable motion or appeal, or point of 
                                order submitted to the Senate,
                        to be equally divided between, and controlled 
                        by, the mover and the manager of the 
                        implementing bill, except that in the event the 
                        manager of the implementing bill is in favor of 
                        any such amendment, motion, appeal, or point of 
                        order, the time in opposition thereto, shall be 
                        controlled by the minority leader or designee 
                        of the minority leader. The majority leader and 
                        minority leader, or either of them, may, from 
                        time under their control on the passage of an 
                        implementing bill, allot additional time to any 
                        Senator during the consideration of any 
                        amendment, debatable motion or appeal, or point 
                        of order.
                    ``(C) Other motions.--A motion to recommit an 
                implementing bill is not in order.
                    ``(D) Final passage.--Upon the expiration of the 30 
                hours available for consideration of the implementing 
                bill, it shall not be in order to offer or vote on any 
                amendment to, or motion with respect to, such bill. 
                Immediately following the conclusion of debate in the 
                Senate on an implementing bill that was introduced in 
                the Senate, such bill shall be deemed to have been read 
                a third time and the vote on final passage of such bill 
                shall occur without any intervening action or debate.
                    ``(E) Debate on differences between the houses.--
                Debate in the Senate on motions and amendments 
                appropriate to resolve the differences between the 
                Houses, at any particular stage of the proceedings, 
                shall be limited to not more than 5 hours.
                    ``(F) Debate on conference report.--Debate in the 
                Senate on the conference report shall be limited to not 
                more than 10 hours.
            ``(5) Floor consideration in the house of 
        representatives.--
                    ``(A)  Proceed to consideration.--On the sixth day 
                after the implementing bill is placed on the calendar, 
                it shall be privileged for any Member to move without 
                debate that the House resolve itself into the Committee 
                of the Whole House on the state of the Union, for the 
                consideration of the bill, and the first reading of the 
                bill shall be dispensed with.
                    ``(B) General debate.--After general debate, which 
                shall be confined to the implementing bill and which 
                shall not exceed 4 hours, to be equally divided and 
                controlled by the chairman and ranking minority member 
                of the Committee or Committees to which the bill had 
                been referred, the bill shall be considered for 
                amendment by title under the 5-minute rule and each 
                title shall be considered as having been read. The 
                total time for considering all amendments shall be 
                limited to 26 hours of which the total time for 
                debating each amendment under the 5-minute rule shall 
                not exceed one hour.
                    ``(C) Rise and report.--At the conclusion of the 
                consideration of the implementing bill for amendment, 
                the Committee of the Whole on the state of the Union 
                shall rise and report the bill to the House with such 
                amendments as may have been adopted, and the previous 
                question shall be considered as ordered on the bill and 
                the amendments thereto, and the House shall proceed to 
                vote on final passage without intervening motion except 
                one motion to recommit.
            ``(6) Computation of days.--For purposes of this 
        subsection, in computing a number of days in either House, 
        there shall be excluded--
                    ``(A) the days on which either House is not in 
                session because of an adjournment of more than 3 days 
                to a day certain, or an adjournment of the Congress 
                sine die, and
                    ``(B) any Saturday and Sunday not excluded under 
                subparagraph (A) when either House is not in session.

``SEC. 2204. OPERATION OF THE COMMISSION.

    ``(a) Membership.--
            ``(1) In general.--The Commission shall be composed of 7 
        members appointed by the President and confirmed by the Senate. 
        Members shall be appointed not later than 90 days after the 
        date of the enactment of this title.
            ``(2) Chairperson.--The President shall designate 1 
        individual described in paragraph (1) who shall serve as 
        Chairperson of the Commission.
    ``(b) Composition.--The membership of the Commission shall include 
individuals with national recognition for their expertise in health 
markets. In appointing members of the Commission, the President shall 
ensure that no more than 4 members of the Commission are affiliated 
with the same political party.
    ``(c) Terms.--
            ``(1) In general.--The terms of members of the Commission 
        shall be for 6 years, except that of the members first 
        appointed, 2 shall be appointed for an initial term of 4 years 
        and 2 shall be appointed for an initial term of 2 years.
            ``(2) Continuation in office.--Upon the expiration of a 
        term of office, a member shall continue to serve until a 
        successor is appointed and qualified.
    ``(d) Vacancies.--
            ``(1) In general.--A vacancy in the Commission shall be 
        filled in the same manner as the original appointment, but the 
        individual appointed to fill the vacancy shall serve only for 
        the unexpired portion of the term for which the individual's 
        predecessor was appointed.
            ``(2) No impairment of function.--A vacancy in the 
        membership of the Commission does not impair the authority of 
        the remaining members to exercise all of the powers of the 
        Commission.
            ``(3) Acting chairperson.--The Commission may designate a 
        member to act as Chairperson during any period in which there 
        is no Chairperson designated by the President.
    ``(e) Meetings; Quorum.--
            ``(1) Meetings.--The Chairperson shall preside at meetings 
        of the Commission, and in the absence of the Chairperson, the 
        Commission shall elect a member to act as Chairperson pro 
        tempore.
            ``(2) Quorum.--Four members of the Commission shall 
        constitute a quorum thereof.
    ``(f) Administrative Provisions.--
            ``(1) FACA not applicable.--The Federal Advisory Committee 
        Act (5 U.S.C. App.) shall not apply to the Commission.
            ``(2) Pay and travel expenses.--
                    ``(A) Pay.--Each member shall be paid at a rate 
                equal to the daily equivalent of the minimum annual 
                rate of basic pay payable for level IV of the Executive 
                Schedule under section 5315 of title 5, United States 
                Code, for each day (including travel time) during which 
                the member is engaged in the actual performance of 
                duties vested in the Commission.
                    ``(B) Travel expenses.--Members shall receive 
                travel expenses, including per diem in lieu of 
                subsistence, in accordance with sections 5702 and 5703 
                of title 5, United States Code.
            ``(3) Executive director.--
                    ``(A) In general.--The Commission shall, without 
                regard to section 5311(b) of title 5, United States 
                Code, appoint an Executive Director.
                    ``(B) Pay.--The Executive Director shall be paid at 
                a rate equivalent to a rate for the Senior Executive 
                Service.
            ``(4) Staff.--
                    ``(A) In general.--Subject to subparagraphs (B) and 
                (C), the Executive Director, with the approval of the 
                Commission, may appoint and fix the pay of additional 
                personnel.
                    ``(B) Pay.--The Executive Director may make such 
                appointments without regard to the provisions of title 
                5, United States Code, governing appointments in the 
                competitive service, and any personnel so appointed may 
                be paid without regard to the provisions of chapter 51 
                and subchapter III of chapter 53 of such title, 
                relating to classification and General Schedule pay 
                rates, except that an individual so appointed may not 
                receive pay in excess of 120 percent of the annual rate 
                of basic pay payable for GS-15 of the General Schedule.
                    ``(C) Detailed personnel.--Upon request of the 
                Executive Director, the head of any Federal department 
                or agency may detail any of the personnel of that 
                department or agency to the Commission to assist the 
                Commission in carrying out its duties under this Act.
            ``(5) Other authority.--
                    ``(A) Contract services.--The Commission may 
                procure by contract, to the extent funds are available, 
                the temporary or intermittent services of experts or 
                consultants pursuant to section 3109 of title 5, United 
                States Code.
                    ``(B) Leases and property.--The Commission may 
                lease space and acquire personal property to the extent 
                funds are available.
    ``(f) Authorization of appropriations.--There are authorized to be 
appropriated such sums as are necessary for the operation of the 
Commission.

             TITLE III--PREMIUM AND COST-SHARING ASSISTANCE

SEC. 301. PREMIUM AND COST-SHARING ASSISTANCE.

    (a) Medicaid State Plan Requirement.--Section 1902(a) of the Social 
Security Act (42 U.S.C. 1396a(a)), as amended by section 101(a), is 
amended--
            (1) by striking ``and'' at the end of paragraph (62);
            (2) by striking the period at the end of paragraph (63) and 
        inserting ``; and''; and
            (3) by adding at the end the following new paragraph:
            ``(64) provide for a State program furnishing premium and 
        cost-sharing assistance in accordance with part B.''.
    (b) State Programs for Premium and Cost-Sharing Assistance.--Title 
XIX of the Social Security Act (42 U.S.C. 1396 et seq.) is amended by 
adding at the end the following new part:

    ``PART B--STATE PROGRAMS FOR PREMIUM AND COST-SHARING ASSISTANCE

``SEC. 1951. REQUIREMENT TO OPERATE STATE PROGRAM.

    ``(a) In General.--A State with a State plan approved under part A 
shall have in effect a program--
            ``(1) for furnishing premium assistance under section 
        1952--
                    ``(A) to individuals with incomes below certain 
                income thresholds described in section 1952(a)(2)(A)(i) 
                in calendar years beginning after 1996; and
                    ``(B) to children and pregnant women described in 
                section 1952(a)(2)(A)(ii) in calendar years beginning 
                after 1995; and
            ``(2) for determining eligibility for cost-sharing 
        assistance under section 1953 in calendar years beginning after 
        1996.
    ``(b) State Option.--A State may have in effect a program--
            ``(1) for furnishing premium assistance under section 1952 
        to individuals with incomes below certain income thresholds 
        described in section 1952(a)(2)(A)(i) during 1996; and
            ``(2) for determining eligibility for cost-sharing 
        assistance under section 1953 during 1996.
    ``(c) Designation of State Agency.--A State may designate any 
appropriate State agency to administer the program under this part.

``SEC. 1952. ASSISTANCE WITH CERTIFIED STANDARD HEALTH PLAN PREMIUMS.

    ``(a) Eligibility.--
            ``(1) In general.--An eligible individual (as defined in 
        section 1958(3)) who has been determined by a State under 
        section 1954 to be a premium subsidy eligible individual (as 
        defined in paragraph (2)) shall be entitled to premium 
        assistance in the amount determined under subsection (b).
            ``(2) Premium subsidy eligible individual.--
                    ``(A) In general.--For purposes of this part, the 
                term `premium subsidy eligible individual' means any of 
                the following individuals:
                            ``(i) Individuals with incomes below 
                        certain income thresholds.--An eligible 
                        individual who has a family income determined 
                        under section 1958(2) which does not exceed the 
                        eligibility percentage specified in 
                        subparagraph (B) of the poverty line (as 
                        defined in section 1958(5)).
                            ``(ii) Children and pregnant women.--An 
                        eligible individual who is a child under 18 
                        years of age or a pregnant woman (as defined in 
                        section 1958(6)) and has a family income 
                        determined under section 1958(2) which does not 
                        exceed 240 percent of the poverty line.
                            ``(iii) Reduction in eligibility 
                        percentages.--For requirement that the 
                        President reduce the percentage of the poverty 
                        line applicable to an individual's family 
                        income for purposes of determining eligibility 
                        for premium assistance under this section, see 
                        section 801 of the Health Security Act.
                    ``(B) Eligibility percentage.--
                            ``(i) In general.--The eligibility 
                        percentage shall be determined under the 
                        following table:
                                                             Applicable
``Calendar year:
                                                eligibility percentage:
        1996.........................................           100    
        1997.........................................           125    
        1998.........................................           150    
        1999.........................................           175    
        2000.........................................           200    
    ``(b) Amount of Assistance.--
            ``(1) In general.--
                    ``(A) Determination of amount.--Except as provided 
                in paragraph (4), the amount of premium assistance for 
                a month for a premium subsidy eligible individual is 
                the lesser of--
                            ``(i) the premium assistance amount 
                        determined under paragraph (2); or
                            ``(ii) the amount of the premium for 
                        coverage under the certified standard health 
                        plan (as defined in section 1958(1)) in which 
                        the individual is enrolled that is not paid (or 
                        offered to be paid) on behalf of such 
                        individual by an employer.
                    ``(B) Special rule for determining amount of 
                employer payments.--If an employer makes a payment 
                toward the premium for coverage under a certified 
                standard health plan on behalf of a family (rather than 
                any particular individual) such contribution shall be 
                allocated ratably among the individuals in the family.
            ``(2) Premium assistance amount determined.--
                    ``(A) In general.--The premium assistance amount 
                determined under this paragraph is an amount equal to 
                the lesser of--
                            ``(i) the subsidy percentage specified in 
                        paragraph (3) multiplied by \1/12\th of the 
                        annual premium for coverage under the certified 
                        standard health plan in which the individual is 
                        enrolled, or
                            ``(ii) the subsidy percentage specified in 
                        paragraph (3) multiplied by \1/12\th of the 
                        weighted average annual premium for the 
                        individual's class of enrollment (determined in 
                        accordance with subparagraph (B)) for all 
                        community-rated certified standard health plans 
                        offered in the community rating area in which 
                        the individual resides.
                    ``(B) Determination of weighted average annual 
                premium.--For purposes of subparagraph (A)(ii), the 
                weighted average annual premium for a class of 
                enrollment under community-rated certified standard 
                health plans offered in a community rating area shall 
                be based on the number of primary enrollees in such 
                class enrolled in each of the plans.
            ``(3) Subsidy percentage.--For purposes of paragraph 
        (2)(A), the term `subsidy percentage' means the following:
                    ``(A) Individuals with incomes below certain income 
                thresholds.--
                            ``(i) Percentage determined.--For a premium 
                        subsidy eligible individual described in 
                        subsection (a)(2)(A)(i)--
                                    ``(I) for 1997, 100 percent reduced 
                                (but not below zero) by the product of 
                                the applicable factor determined under 
                                clause (ii) multiplied by the number of 
                                percentage points (rounded to the 
                                nearest whole number) by which such 
                                individual's family income exceeds 100 
                                percent of the poverty line; and
                                    ``(II) for succeeding years, 100 
                                percent reduced (but not below zero) by 
                                1 percentage point for each 1 
                                percentage point by which such 
                                individual's family income exceeds 100 
                                percent of the poverty line.
                            ``(ii) Applicable factor.--The applicable 
                        factor determined under this clause for a 
                        calendar year is the number equal to the 
                        quotient of--
                                    ``(I) 100, divided by
                                    ``(II) the eligibility percentage 
                                for the year determined under 
                                subsection (a)(2)(B) (expressed as a 
                                whole number) minus 100.
                    ``(B) Children and pregnant women.--For a premium 
                subsidy eligible individual described in subsection 
                (a)(2)(A)(ii)--
                            ``(i) 100 percent if the individual's 
                        family income does not exceed 185 percent of 
                        the poverty line;
                            ``(ii) 80 percent if the individual's 
                        family income exceeds 185 percent of the 
                        poverty line but does not exceed 200 percent of 
                        the poverty line;
                            ``(iii) 60 percent if the individual's 
                        family income exceeds 200 percent of the 
                        poverty line but does not exceed 215 percent of 
                        the poverty line;
                            ``(iv) 40 percent if the individual's 
                        family income exceeds 215 percent of the 
                        poverty line but does not exceed 230 percent of 
                        the poverty line; and
                            ``(v) 20 percent if the individual's family 
                        income exceeds 230 percent of the poverty line 
                        but does not exceed 240 percent of the poverty 
                        line.
            ``(4) Minimum amount.--
                    ``(A) In general.--If the total amount determined 
                under paragraph (1) with respect to all premium subsidy 
                eligible individuals in a family for a year (determined 
                as if the individuals were eligible for subsidies for 
                the entire year) does not exceed the amount determined 
                under subparagraph (B) the individuals shall not be 
                eligible to receive premium assistance under this 
                section.
                    ``(B) Amount determined.--The amount determined 
                under this subparagraph shall be--
                            ``(i) for 1996, $150; and
                            ``(ii) for 1997 and succeeding years, an 
                        amount equal to the amount determined under 
                        this subparagraph for the previous year updated 
                        through the midpoint of the year by the 
                        estimated percentage change in the medical 
                        consumer price index (as defined in section 
                        1958(4)) during the 12-month period ending at 
                        that midpoint, with appropriate adjustments to 
                        reflect previous underestimations or 
                        overestimations under this subparagraph in the 
                        projected percentage change in the medical 
                        consumer price index.
                    ``(C) Rounding.--Any amount determined under 
                subparagraph (B)(ii) for a year shall be rounded to the 
                nearest multiple of $5.
    ``(c) Payments.--
            ``(1) In general.--The amount of the premium assistance 
        available to a premium subsidy eligible individual under 
        subsection (b) shall be paid by the State in which the 
        individual resides directly to the certified standard health 
        plan in which the individual is enrolled. Payments under the 
        preceding sentence shall commence in the first month during 
        which the individual is enrolled in a certified standard health 
        plan and determined under section 1954 to be a premium subsidy 
        eligible individual.
            ``(2) Administrative errors.--A State is financially 
        responsible for premium assistance paid based on an eligibility 
        determination error to the extent the State's error rate for 
        eligibility determinations exceeds a maximum permissible error 
        rate to be specified by the Secretary.

``SEC. 1953. ASSISTANCE WITH CERTIFIED STANDARD HEALTH PLAN COST-
              SHARING.

    ``(a) Eligibility.--
            ``(1) In general.--An eligible individual who has been 
        determined by a State under section 1954 to be a cost-sharing 
        subsidy eligible individual (as defined in paragraph (2)) shall 
        be eligible for cost-sharing assistance as described in 
        subsection (b). If a State determines that an individual is a 
        cost-sharing eligible individual, the State shall notify the 
        certified standard health plan in which such individual is 
        enrolled of such determination in a timely manner.
            ``(2) Cost-sharing subsidy eligible individual.--For 
        purposes of this part, the term `cost-sharing subsidy eligible 
        individual' means an eligible individual who has a family 
        income determined under section 1958(2) which does not exceed 
        100 percent of the poverty line.
    ``(b) Cost-sharing assistance.--In the case of a cost-sharing 
subsidy eligible individual who is enrolled in a certified standard 
health plan, the cost-sharing assistance under this subsection shall 
consist of the plan's reduction in the cost-sharing otherwise imposed 
under the plan to amounts that are determined appropriate by the 
National Health Benefits Board under section 21213(d).
    ``(c) Termination of Cost-Sharing Assistance.--An individual's 
eligibility for cost-sharing assistance under this section shall 
terminate the month immediately following a month in which the State 
determines that the individual is no longer a cost-sharing subsidy 
eligible individual.

``SEC. 1954. ELIGIBILITY DETERMINATIONS.

    ``(a) In General.--The Secretary shall promulgate regulations 
specifying requirements for State programs under this part with respect 
to determining eligibility for premium and cost-sharing assistance, 
including requirements with respect to--
            ``(1) application procedures;
            ``(2) information verification procedures;
            ``(3) timeliness of eligibility determinations;
            ``(4) procedures for applicants to appeal adverse 
        decisions; and
            ``(5) any other matters determined appropriate by the 
        Secretary.
    ``(b) Specifications for Regulations.--The regulations promulgated 
by the Secretary under subsection (a) shall include the following 
requirements:
            ``(1) Frequency of applications.--A State program shall 
        provide that an individual may file an application for 
        assistance with an agency designated by the State at any time, 
        in person or by mail.
            ``(2) Application form.--A State program shall provide for 
        the use of an application form developed by the Secretary under 
        subsection (c).
            ``(3) Distribution of Applications.--A State program shall 
        distribute applications for assistance through employers and 
        appropriate public agencies.
            ``(4) Requirement to submit revised application.--A State 
        program shall, in accordance with regulations promulgated by 
        the Secretary, require individuals to submit revised 
        applications during a year to reflect changes in estimated 
        family incomes, including changes in employment status of 
        family members, during the year. The State shall revise the 
        amount of any premium assistance based on such a revised 
        application.
            ``(5) Presumptive eligibility for pregnant women.--A State 
        program shall, in accordance with regulations promulgated by 
        the Secretary, establish a system under which pregnant women 
        may be determined presumptively eligible for assistance under 
        this part for a period determined appropriate by the Secretary.
            ``(6) AFDC applicants.--A State program shall include a 
        procedure under which individuals applying for benefits under 
        title IV shall have an opportunity to apply for assistance 
        under this part in connection with such application.
            ``(7) Verification.--A State program shall provide for 
        verification of the information supplied in applications under 
        this part. Such verification may include examining return 
        information disclosed to the State for such purpose under 
        section 6103(l)(15) of the Internal Revenue Code of 1986.
    ``(c) Administration of State Programs.--
            ``(1) In general.--The Secretary shall establish standards 
        for States operating programs under this part which ensure that 
        such programs are operated in a uniform manner with respect to 
        application procedures, data processing systems, and such other 
        administrative activities as the Secretary determines to be 
        necessary.
            ``(2) Application forms.--The Secretary shall develop an 
        application form for assistance which shall--
                    ``(A) be simple in form and understandable to the 
                average individual;
                    ``(B) require the provision of information 
                necessary to make a determination as to whether an 
                individual is a premium or cost-sharing subsidy 
                eligible individual including a declaration of 
                estimated income by the individual based, at the 
                election of the individual--
                            ``(i) on multiplying by a factor of 4 the 
                        individual's family income for the 3-month 
                        period immediately preceding the month in which 
                        the application is made, or
                            ``(ii) on estimated income for the entire 
                        year for which the application is submitted; 
                        and
                    ``(C) require attachment of such documentation as 
                deemed necessary by the Secretary in order to ensure 
                eligibility for assistance.
            ``(3) Outreach activities.--A State operating a program 
        under this part shall conduct such outreach activities as the 
        Secretary determines appropriate.
    ``(d) Effectiveness of Eligibility for Premium Subsidies.--A 
determination by a State that an individual is a premium subsidy 
eligible individual shall be effective for the calendar year for which 
such determination is made unless a revised application submitted under 
subsection (b)(4) indicates that an individual is no longer eligible 
for premium assistance.
    ``(e) Penalties for Material Misrepresentations.--
            ``(1) In general.--Any individual who knowingly makes a 
        material misrepresentation of information in an application for 
        assistance under this part shall be liable to the Federal 
        Government for the amount any premium assistance and cost-
        sharing assistance received by individual on the basis of a 
        misrepresentation and interest on such amount at a rate 
        specified by the Secretary, and shall, in addition, be liable 
        to the Federal Government for $2,000 or, if greater, 3 times 
        the amount any premium assistance and cost-sharing assistance 
        received by individual on the basis of a misrepresentation.
            ``(2) Collection of penalty amounts.--A State which 
        receives an application for assistance with respect to which a 
        material misrepresentation has been made shall collect the 
        penalty amount required under paragraph (1) and submit 50 
        percent of such amount to the Secretary in a timely manner.

``SEC. 1955. END-OF-YEAR RECONCILIATION FOR PREMIUM ASSISTANCE.

    ``(a) In General.--
            ``(1) Requirement to file statement.--An individual who 
        received premium assistance under this part from a State for 
        any month in a calendar year shall file with the State an 
        income reconciliation statement to verify the individual's 
        family income for the year. Such a statement shall be filed at 
        such time, and contain such information, as the State may 
        specify in accordance with regulations promulgated by the 
        Secretary.
            ``(2) Notice of requirement.--A State shall provide a 
        written notice of the requirement under paragraph (1) at the 
        end of the year to an individual who received premium 
        assistance under this part from such State in any month during 
        the year.
    ``(b) Reconciliation of Premium Assistance Based on Actual 
Income.--
            ``(1) In general.--Based on and using the income reported 
        in the reconciliation statement filed under subsection (a) with 
        respect to an individual, the State shall compute the amount of 
        premium assistance that should have been provided under this 
        part with respect to the individual for the year involved.
            ``(2) Overpayment of assistance.--If the total amount of 
        the premium assistance provided was greater than the amount 
        computed under paragraph (1), the individual is liable to the 
        State to pay an amount equal to the amount of the excess 
        payment. Any amount collected by a State under this paragraph 
        shall be submitted to the Secretary in a timely manner.
            ``(3) Underpayment of assistance.--If the total amount of 
        the premium assistance provided was less than the amount 
        computed under paragraph (1), the State shall pay to the 
        individual an amount equal to the amount of the deficit.
            ``(4) State option.--A State may, in accordance with 
        regulations promulgated by the Secretary, establish a procedure 
        under which any overpayments or underpayments of premium 
        assistance determined under paragraphs (2) and (3) with respect 
        to an individual for a year may be collected or paid, as 
        appropriate, through adjustments to the premium assistance 
        furnished to such individual in the succeeding year.
    ``(c) Verification.--Each State may use such information as it has 
available to verify income of individuals with applications filed under 
this part, including return information disclosed to the State for such 
purpose under section 6103(l)(15) of the Internal Revenue Code of 1986.
    ``(d) Penalties for Failure to File.--In the case of an individual 
who is required to file a statement under this section in a year who 
fails to file such a statement by such date as the Secretary shall 
specify in regulations, the entire amount of the premium assistance 
provided in such year shall be considered an excess amount under 
subsection (b)(2) and such individual shall not be eligible for premium 
assistance under this part until such statement is filed. A State, 
using rules established by the Secretary, shall waive the application 
of this subsection if the individual establishes, to the satisfaction 
of the State under such rules, good cause for the failure to file the 
statement on a timely basis.
    ``(e) Penalties for False Information.--Any individual who provides 
false information in a statement filed under subsection (a) is subject 
to the same penalties as are provided under section 1954(e) for a 
misrepresentation of material fact described in such section.
    ``(f) No Reconciliation for Cost-Sharing Reductions.--No 
reconciliation statement is required under this section with respect to 
cost-sharing assistance provided under section 1953.

``SEC. 1956. PAYMENTS TO STATES.

    ``(a) In General.--
            ``(1) Payments for premium assistance.--A State operating a 
        program for furnishing premium assistance under section 1952 
        shall be entitled to receive payments in an amount equal to the 
        amount of premium assistance paid on behalf of premium subsidy 
        eligible individuals. Such payments shall be made at such time 
        and in such form as provided in regulations promulgated by the 
        Secretary.
            ``(2) Matching payments for administrative expenses.--The 
        Secretary shall pay to each State operating a program for 
        furnishing premium assistance under section 1952 and 
        determining eligibility for cost-sharing assistance under 
        section 1953, for each quarter beginning with the quarter 
        commencing January 1, 1996, an amount equal to 75 percent of 
        the total amount expended by the State during the quarter as 
        found necessary by the Secretary for the proper and efficient 
        administration of the program.
            ``(3) State entitlement.--This subsection constitutes 
        budget authority in advance of appropriations Acts, and 
        represents the obligation of the Federal Government to provide 
        payments to States operating programs under this part in 
        accordance with this subsection.
    ``(b) Funding.--The amount paid to States under subsection (a) 
shall be paid by the Secretary from--
            ``(1) amounts made available under the Health Security 
        Trust Fund established under section 9551 of the Internal 
        Revenue Code of 1986, or
            ``(2) if such amounts are insufficient, out of any funds in 
        the Treasury of the United States not otherwise appropriated.
    ``(c) Audits.--The Secretary shall conduct regular audits of the 
activities under the State programs conducted under this part.

``SEC. 1957. GRANT PROGRAM FOR PROVIDING COST-SHARING ASSISTANCE FOR 
              CERTAIN INDIVIDUALS WITH INCOMES ABOVE 100 PERCENT OF THE 
              POVERTY LINE.

    ``(a) Establishment.--The Secretary shall pay to a State which 
elects to operate a cost-sharing assistance program under this section 
beginning on or after January 1, 1997, the amount determined under 
subsection (c).
    ``(b) Program Described.--
            ``(1) In general.--A program described in this subsection 
        consists of a State providing cost-sharing assistance to 
        individuals enrolled in certified standard health plans whose 
        family income determined under section 1958(2) exceeds 100 
        percent but does not exceed 200 percent of the poverty line.
            ``(2) Eligibility and administration.--A State operating a 
        program under this subsection shall be responsible for 
        administering the program, including--
                    ``(A) establishing eligibility requirements for 
                individuals applying for assistance under the program; 
                and
                    ``(B) with respect to an eligible individual, 
                determining the appropriate amount of cost-sharing that 
                will be paid by the program.
            ``(3) Payments for cost-sharing.--The amount of cost-
        sharing assistance available to an eligible individual under 
        this section (as determined in accordance with paragraph 
        (2)(B)) shall be paid by the State directly to the certified 
        standard health plan in which the individual is enrolled.
    ``(c) Federal Payment Amount.--
            ``(1) In general.--The Secretary shall pay a State 
        operating a program under this section during a quarter an 
        amount equal to 50 percent of the sum of--
                    ``(A) the amount demonstrated by the State to have 
                been expended during the quarter for furnishing cost-
                sharing assistance under this section to eligible 
                individuals; and
                    ``(B) the amount expended during the quarter as 
                found necessary by the Secretary for the proper and 
                efficient administration of the program.
            ``(2) Limitation on federal payments.--
                    ``(A) In general.--The total amount paid to a State 
                under paragraph (1) for a fiscal year shall not exceed 
                the amount determined under subparagraph (B).
                    ``(B) Amount determined.--
                            ``(i) In general.--Except as provided in 
                        clause (ii), the amount determined under this 
                        subparagraph for a State for a fiscal year is 
                        the product of--
                                    ``(I) $2,000,000,000; multiplied by
                                    ``(II) the ratio of the average 
                                population of the State during the 
                                fiscal year as estimated by the 
                                Secretary to the average population of 
                                all States during the fiscal year as 
                                estimated by the Secretary.
                            ``(ii) Special rule for fiscal year 1998.--
                        The amount determined under this subparagraph 
                        for a State for fiscal year 1998 shall be an 
                        amount equal to 75 percent of the amount 
                        determined under clause (i) for such fiscal 
                        year.
                            ``(iii) Funding.--The amount paid to a 
                        State under this subsection shall be paid by 
                        the Secretary from amounts made available under 
                        the Health Security Trust Fund established 
                        under section 9551 of the Internal Revenue Code 
                        of 1986.
            ``(3) Additional limitation on payments.--For requirement 
        that the President reduce the payments to States under this 
        subsection, see section 801 of the Health Security Act.
            ``(4) Audits.--The Secretary shall conduct regular audits 
        of the activities under the State programs conducted under this 
        section.

``SEC. 1958. DEFINITIONS AND DETERMINATIONS OF INCOME.

    ``For purposes of this part:
            ``(1) Certified standard health plan.--The term `certified 
        standard health plan' means a certified health plan (within the 
        meaning of section 21011(a)(1)) providing the standard benefits 
        package as described in section 21201(a).
            ``(2) Determinations of income.--
                    ``(A) Family income.--The term `family income' 
                means, with respect to an individual who--
                            ``(i) is not a dependent (as defined in 
                        subparagraph (B)) of another individual, the 
                        sum of the modified adjusted gross incomes (as 
                        defined in subparagraph (D)) for the 
                        individual, the individual's spouse, and 
                        dependents of the individual; or
                            ``(ii) is a dependent of another 
                        individual, the sum of the modified adjusted 
                        gross incomes for the other individual, the 
                        other individual's spouse, and dependents of 
                        the other individual.
                    ``(B) Dependent.--The term `dependent' shall have 
                the meaning given such term under paragraphs (1) or (2) 
                of section 152(a) of the Internal Revenue Code of 1986.
                    ``(C) Special rule for foster children.--For 
                purposes of subparagraph (A), a child who is placed in 
                foster care by a State agency shall not be considered a 
                dependent of another individual.
                    ``(D) Modified adjusted gross income.--The term 
                `modified adjusted gross income' means adjusted gross 
                income (as defined in section 62(a) of the Internal 
                Revenue Code of 1986)--
                            ``(i) determined without regard to sections 
                        135, 162(l), 911, 931, and 933 of such Code, 
                        and
                            ``(ii) increased by--
                                    ``(I) the amount of interest 
                                received or accrued by the individual 
                                during the taxable year which is exempt 
                                from tax,
                                    ``(II) the amount of the social 
                                security benefits (as defined in 
                                section 86(d) of such Code) received 
                                during the taxable year to the extent 
                                not included in gross income under 
                                section 86 of such Code, and
                                    ``(III) the amount of aid to 
                                families with dependent children 
                                received during the taxable year under 
                                part A of title IV to the extent not 
                                included in gross income under such 
                                Code.
                The determination under the preceding sentence shall be 
                made without regard to any carryover or carryback.
            ``(3) Eligible Individual.--
                    ``(A) In general.--The term `eligible individual' 
                means an individual who is residing in the United 
                States and who is--
                            ``(i) a citizen or national of the United 
                        States; or
                            ``(ii) an alien permanently residing in the 
                        United States under color of law (as defined in 
                        subparagraph (C)).
                    ``(B) Exclusion.--The term `eligible individual' 
                shall not include an individual who is an inmate of a 
                public institution (except as a patient of a medical 
                institution).
                    ``(C) Alien permanently residing in the united 
                states under color of law.--The term `alien permanently 
                residing in the United States under color of law' means 
                an alien lawfully admitted for permanent residence 
                (within the meaning of section 101(a)(20) of the 
                Immigration and Nationality Act), and includes any of 
                the following:
                            ``(i) An alien who is admitted as a refugee 
                        under section 207 of the Immigration and 
                        Nationality Act.
                            ``(ii) An alien who is granted asylum under 
                        section 208 of such Act.
                            ``(iii) An alien whose deportation is 
                        withheld under section 243(h) of such Act.
                            ``(iv) An alien who is admitted for 
                        temporary residence under section 210, 210A, or 
                        245A of such Act.
                            ``(v) An alien who has been paroled into 
                        the United States under section 212(d)(5) of 
                        such Act for an indefinite period or who has 
                        been granted extended voluntary departure as a 
                        member of a nationality group.
                            ``(vi) An alien who is the spouse or 
                        unmarried child under 21 years of age of a 
                        citizen of the United States, or the parent of 
                        such a citizen if the citizen is over 21 years 
                        of age, and with respect to whom an application 
                        for adjustment to lawful permanent residence is 
                        pending.
            ``(4) Medical consumer price index.--The term `medical 
        consumer price index' means the medical care services component 
        of the consumer price index (for urban consumers) as determined 
        by the Bureau of Labor Statistics.
            ``(5) Poverty line.--The term `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) that--
                    ``(A) in the case of a family of less than five 
                individuals, is applicable to a family of the size 
                involved; and
                    ``(B) in the case of a family of more than four 
                individuals, is applicable to a family of four persons.
            ``(6) Pregnant woman.--The term `pregnant woman' means a 
        woman described in section 1902(l)(1)(A).
            ``(7) Premium.--Any reference to the term `premium' 
        includes a reference to premium equivalence for self-insured 
        plans.''.
    (c) Conforming Amendments.--(1) Title XIX of the Social Security 
Act (42 U.S.C. 1396 et seq.) is amended by striking the title and 
inserting the following:

``TITLE XIX--MEDICAL ASSISTANCE PROGRAMS AND STATE PROGRAMS FOR PREMIUM 
                      AND COST-SHARING ASSISTANCE

     ``PART A--GRANTS TO STATES FOR MEDICAL ASSISTANCE PROGRAMS''.

    (2) Title XIX of the Social Security Act (42 U.S.C. 1396 et seq.) 
is amended by striking each reference to ``this title'' and inserting 
``this part''.

          TITLE IV--ADMINISTRATIVE SIMPLIFICATION AND PRIVACY

SEC. 401. ADMINISTRATIVE SIMPLIFICATION.

    (a) Medicare and Medicaid Coverage Data Bank and Related 
Identification Processes.--
            (1) Delay of employer reporting requirement.--
                    (A) In general.--Section 1144(c)(1)(A) of the 
                Social Security Act (42 U.S.C. 1320-14(c)(1)(A)) is 
                amended by striking ``January 1, 1994'' and inserting 
                ``January 1, 1996''.
                    (B) Effective date.--The amendment made by this 
                paragraph shall be effective on the date of the 
                enactment of this Act.
            (2) Repeal of data bank.--
                    (A) In general.--Effective January 1, 1996, section 
                1144 of the Social Security Act (42 U.S.C. 1320b-14) 
                and section 101(f) of the Employee Retirement Income 
                Security Act of 1974 (29 U.S.C. 1021(f)) are repealed.
                    (B) Internal revenue code provision.--Section 
                6103(l) of the Internal Revenue Code of 1986 is amended 
                by striking paragraph (12).
                    (C) Identification of medicare secondary payer 
                situations.--Section 1862(b) of the Social Security Act 
                (42 U.S.C. 1395y(b)) is amended by striking paragraph 
                (5).
                    (D) Conforming amendments.--(i) Section 
                1902(a)(25)(A)(i) of the Social Security Act (42 U.S.C. 
                1396a(a)(25)(A)(i)) is amended by striking ``including 
                the use of information collected by the Medicare and 
                Medicaid Coverage Data Bank under section 1144 and any 
                additional measures''.
                    (ii) Subsection (a)(8)(B) of section 552a of title 
                5, United States Code, is amended--
                            (I) in clause (v), by inserting ``; or'' at 
                        the end;
                            (II) in clause (vi), by striking ``or'' at 
                        the end; and
                            (III) by striking clause (vii).
                    (E) Effective date.--The amendments made by this 
                paragraph shall be effective on and after January 1, 
                1996.
    (b) Health Information Network.--
            (1) In general.--Title XI of the Social Security Act (42 
        U.S.C. 1301 et seq.) is amended by adding at the end the 
        following new subtitle:

              ``Subtitle B--Administrative Simplification

                    ``table of contents of subtitle

              ``Subtitle B--Administrative Simplification

                   ``Part I--Purpose and Definitions

        ``Sec. 11701. Purpose.
        ``Sec. 11702. Definitions.
  ``Part II--Standards for Data Elements and Information Transactions

        ``Sec. 11711. General requirements on Secretary.
        ``Sec. 11712. Standards for data elements of health 
                            information.
        ``Sec. 11713. Information transaction standards.
        ``Sec. 11714. Timetables for adoption of standards.
   ``Part III--Requirements With Respect to Certain Transactions and 
                              Information

        ``Sec. 11721. Requirements with respect to certain transactions 
                            and information.
        ``Sec. 11722. Timetables for compliance with requirements.
                ``Part IV--Accessing Health Information

        ``Sec. 11731. Accessing health information for authorized 
                            purposes.
        ``Sec. 11732. Responding to access requests.
        ``Sec. 11733. Length of time information should be accessible.
        ``Sec. 11734. Timetables for adoption of standards and 
                            compliance.
  ``Part V--Standards and Certification for Health Information Network

        ``Sec. 11741. Standards and certification for health 
                            information network services.
        ``Sec. 11742. Ensuring availability of information.
                          ``Part VI--Penalties

        ``Sec. 11751. General penalty for failure to comply with 
                            requirements and standards.
                  ``Part VII--Miscellaneous Provisions

        ``Sec. 11761. Imposition of additional requirements.
        ``Sec. 11762. Effect on State law.
        ``Sec. 11764. Health information continuity.
        ``Sec. 11765. Protection of commercial information.
        ``Sec. 11766. Payment for health care services or health plan 
                            premiums.
        ``Sec. 11767. Health security cards.
        ``Sec. 11768. Misuse of health security card or personal health 
                            identifier.
        ``Sec. 11769. Direct billing for clinical laboratory services.
        ``Sec. 11770. Authorization of appropriations.
                ``Part VIII--Assistance to the Secretary

        ``Sec. 11771. General requirement on Secretary.
        ``Sec. 11772. Health information advisory committee.
    ``Part IX--Demonstration Projects for Community-based Clinical 
                          Information Systems

        ``Sec. 11781. Grants for demonstration projects.

                   ``PART I--PURPOSE AND DEFINITIONS

``SEC. 11701. PURPOSE.

    ``It is the purpose of this subtitle to improve the efficiency and 
effectiveness of the health care system, including the medicare program 
under title XVIII and the medicaid program under title XIX, by 
encouraging the development of a health information network through the 
establishment of standards and requirements for the electronic 
transmission of certain health information.

``SEC. 11702. DEFINITIONS.

    ``For purposes of this subtitle:
            ``(1) Code set.--The term `code set' means any set of codes 
        used for encoding data elements, such as tables of terms, 
        medical concepts, medical diagnostic codes, or medical 
        procedure codes.
            ``(2) Coordination of benefits.--The term `coordination of 
        benefits' means determining and coordinating the financial 
        obligations of health plans when health care benefits are 
        payable under 2 or more health plans.
            ``(3) Health care provider.--The term `health care 
        provider' includes a provider of services (as defined in 
        section 1861(u)), a provider of medical or other health 
        services (as defined in section 1861(s)), and any other person 
        furnishing health care services or supplies.
            ``(4) Health information.--The term `health information' 
        means any information, whether oral or recorded in any form or 
        medium that--
                    ``(A) is created or received by a health care 
                provider, health plan, health oversight agency (as 
                defined in section 11802), health researcher, public 
                health authority (as defined in section 11802), 
                employer, life insurer, school or university, or health 
                information network service certified under section 
                11741; and
                    ``(B) relates to the past, present, or future 
                physical or mental health or condition of an 
                individual, the provision of health care to an 
                individual, or the past, present, or future payment for 
                the provision of health care to an individual.
            ``(5) Health information network.--The term `health 
        information network' means the health information system that 
        is formed through the application of the requirements and 
        standards established under this subtitle.
            ``(6) Health information protection organization.--The term 
        `health information protection organization' means a private 
        entity or an entity operated by a State that accesses standard 
        data elements of health information through the health 
        information network, processes such information into non-
        identifiable health information, and may store such 
        information.
            ``(7) Health information network service.--The term `health 
        information network service'--
                    ``(A) means a private entity or an entity operated 
                by a State that enters into contracts to--
                            ``(i) process or facilitate the processing 
                        of nonstandard data elements of health 
                        information into standard data elements;
                            ``(ii) provide the means by which persons 
                        are connected to the health information network 
                        for purposes of meeting the requirements of 
                        this subtitle, including the holding of 
                        standard data elements of health information;
                            ``(iii) provide authorized access to health 
                        information through the health information 
                        network; or
                            ``(iv) provide specific information 
                        processing services, such as automated 
                        coordination of benefits and claims transaction 
                        routing; and
                    ``(B) includes a health information protection 
                organization.
            ``(8) Health plan.--The term `health plan' has the meaning 
        given such term in section 21004(a)(1) except that such term 
        shall include subparagraphs (C), (D), (E), (F), and (H) of such 
        section.
            ``(9) Non-identifiable health information.--The term `non-
        identifiable health information' means health information that 
        is not protected health information as defined in section 
        11802.
            ``(10) Health researcher.--The term `health researcher' 
        shall have the meaning given such term under section 11802.
            ``(11) Patient medical record information.--The term 
        `patient medical record information' means health information 
        derived from a clinical encounter that relates to the physical 
        or mental condition of an individual.
            ``(12) Standard.--The term `standard' when referring to an 
        information transaction or to data elements of health 
        information means the transaction or data elements meet any 
        standard adopted by the Secretary under part II that applies to 
        such information transaction or data elements.

  ``PART II--STANDARDS FOR DATA ELEMENTS AND INFORMATION TRANSACTIONS

``SEC. 11711. GENERAL REQUIREMENTS ON SECRETARY.

    ``(a) In General.--The Secretary shall adopt standards and 
modifications to standards under this subtitle that are--
            ``(1) consistent with the objective of reducing the costs 
        of providing and paying for health care; and
            ``(2) in use and generally accepted or developed or 
        modified by the standards setting organizations accredited by 
        the American National Standard Institute (ANSI).
    ``(b) Initial Standards.--The Secretary may develop an expedited 
process for the adoption of initial standards under this subtitle.
    ``(c) Failsafe.--If the Secretary is unable to adopt standards or 
modified standards in accordance with subsection (a) that meet the 
requirements of this subtitle--
            ``(1) the Secretary may develop or modify such standards 
        and, after providing public notice and after an adequate period 
        for public comment, adopt such standards; and
            ``(2) if the Secretary adopts standards under paragraph 
        (1), the Secretary shall submit a report to the appropriate 
        committees of Congress on the actions taken by the Secretary 
        under this subsection.
    ``(d) Paper formats.--The Secretary may develop methods by which a 
person may use the standards adopted by the Secretary under this 
subtitle with respect to health information that is in written rather 
than electronic form.

``SEC. 11712. STANDARDS FOR DATA ELEMENTS OF HEALTH INFORMATION.

    ``(a) In General.--The Secretary shall adopt standards necessary to 
make data elements of the following health information uniform and 
compatible for electronic transmission through the health information 
network:
            ``(1) the health information that is appropriate for 
        transmission in connection with transactions described in 
        subsections (a), (b), and (d) of section 11721;
            ``(2) the information required to be submitted by a health 
        plan to a State under section 21013; and
            ``(3) patient medical record information.
    ``(b) Additions.--The Secretary may make additions to the sets of 
data elements adopted under subsection (a) as the Secretary determines 
appropriate in a manner that minimizes the disruption and cost of 
compliance with such additions.
    ``(c) Certain Data Elements.--
            ``(1) Unique health identifiers.--The Secretary shall 
        establish a system to provide for a standard unique health 
        identifier for each individual, employer, health plan, and 
        health care provider for use in the health care system. The 
        personal health identifier for an individual shall be an 
        encrypted form of the social security account number assigned 
        to the individual by the Secretary under section 205(c)(2).
            ``(2) Code sets.--
                    ``(A) In general.--The Secretary, in consultation 
                with experts from the private sector and Federal 
                agencies, shall--
                            ``(i) select code sets for appropriate data 
                        elements from among the code sets that have 
                        been developed by private and public entities; 
                        or
                            ``(ii) establish code sets for such data 
                        elements if no code sets for the data elements 
                        have been developed.
                    ``(B) Distribution.--The Secretary shall establish 
                efficient and low-cost procedures for distribution of 
                code sets and modifications to such code sets under 
                section 11714(c).

``SEC. 11713. INFORMATION TRANSACTION STANDARDS.

    ``(a) In General.--The Secretary shall adopt technical standards 
relating to the method by which data elements of health information 
that have been standardized under section 11712 may be transmitted 
electronically, including standards with respect to the format in which 
such data elements shall be transmitted.
    ``(b) Special Rule for Coordination of Benefits.--Any standards 
adopted by the Secretary under paragraph (1) that relate to 
coordination of benefits shall provide that a claim for reimbursement 
for medical services furnished is tested by an algorithm specified by 
the Secretary against all records of enrollment and eligibility for the 
individual who received such services to determine any primary and 
secondary obligors for payment.
    ``(c) Electronic Signature.--The Secretary, in coordination with 
the Secretary of Commerce, shall promulgate regulations specifying 
procedures for the electronic transmission and authentication of 
signatures, compliance with which will be deemed to satisfy State and 
Federal statutory requirements for written signatures with respect to 
information transactions required by this Act and written signatures on 
medical records and prescriptions.

``SEC. 11714. TIMETABLES FOR ADOPTION OF STANDARDS.

    ``(a) Initial Standards for Data Elements.--The Secretary shall 
adopt standards relating to--
            ``(1) the data elements for the information described in 
        section 11712(a)(1) not later than 9 months after the date of 
        the enactment of this subtitle (except in the case of standards 
        with respect to data elements for claims attachments which 
        shall be adopted not later than 24 months after the date of the 
        enactment of this subtitle);
            ``(2) the data elements for the information described in 
        section 11712(a)(2) not later than 9 months after the date of 
        the enactment of this subtitle;
            ``(3) data elements for patient medical record information 
        not earlier than 24 months and not later than 7 years after the 
        date of the enactment of this subtitle; and
            ``(4) any addition to a set of data elements, in 
        conjunction with making such an addition.
    ``(b) Initial Standards for Information Transactions.--The 
Secretary shall adopt standards relating to information transactions 
under section 11713 not later than 9 months after the date of the 
enactment of this subtitle (except in the case of standards for claims 
attachments which shall be adopted not later than 24 months after the 
date of the enactment of this subtitle).
    ``(c) Modifications to Standards.--
            ``(1) In general.--Except as provided in paragraph (2), the 
        Secretary shall review the standards adopted under this 
        subtitle and shall adopt modified standards as determined 
        appropriate, but no more frequently than once every 6 months. 
        Any modification to standards shall be completed in a manner 
        which minimizes the disruption and cost of compliance.
            ``(2) Special rules.--
                    ``(A) Modifications during first 12-month period.--
                Except with respect to additions and modifications to 
                code sets under subparagraph (B), the Secretary shall 
                not adopt any modifications to standards adopted under 
                this subtitle during the 12-month period beginning on 
                the date such standards are adopted unless the 
                Secretary determines that a modification is necessary 
                in order to permit compliance with requirements 
                relating to the standards.
                    ``(B) Additions and modifications to code sets.--
                            ``(i) In general.--The Secretary shall 
                        ensure that procedures exist for the routine 
                        maintenance, testing, enhancement, and 
                        expansion of code sets to accommodate changes 
                        in biomedical science and health care delivery.
                            ``(ii) Additional rules.--If a code set is 
                        modified under this subsection, the modified 
                        code set shall include instructions on how data 
                        elements that were encoded prior to the 
                        modification are to be converted or translated 
                        so as to preserve the value of the data 
                        elements. Any modification to a code set under 
                        this subsection shall be implemented in a 
                        manner that minimizes the disruption and cost 
                        of complying with such modification.
    ``(d) Evaluation of Standards.--The Secretary may establish a 
process to measure or verify the consistency of standards adopted or 
modified under this subtitle. Such process may include demonstration 
projects and analysis of the cost of implementing such standards and 
modifications.

   ``PART III--REQUIREMENTS WITH RESPECT TO CERTAIN TRANSACTIONS AND 
                              INFORMATION

``SEC. 11721. REQUIREMENTS WITH RESPECT TO CERTAIN TRANSACTIONS AND 
              INFORMATION.

    ``(a) Requirements on Plans and Providers Relating to Financial and 
Administrative Transactions.--If a health care provider or a health 
plan conducts any of the following transactions, such transactions 
shall be standard transactions and the information transmitted or 
received in connection with such transaction shall be in the form of 
standard data elements:
            ``(1) Claims (including coordination of benefits).
            ``(2) Claims attachments.
            ``(3) Responses to research inquiries by a health 
        researcher.
            ``(4) Other transactions determined appropriate by the 
        Secretary consistent with the goal of reducing administrative 
        costs.
    ``(b) Requirement Only on Plans Relating to Financial and 
Administrative Transactions.--If a person desires to conduct any of the 
following transactions with a health plan as a standard transaction, 
the health plan shall conduct such standard transaction and the 
information transmitted or received in connection with such transaction 
shall be in the form of standard data elements:
            ``(1) Enrollment and disenrollment.
            ``(2) Eligibility.
            ``(3) Payment and remittance advice.
            ``(4) Premium payments.
            ``(5) First report of injury.
            ``(6) Claims status.
            ``(7) Referral certification and authorization.
            ``(8) Other transactions determined appropriate by the 
        Secretary consistent with the goal of reducing administrative 
        costs.
    ``(c) Requirement on Plans Relating to Quality Information.--Any 
information required to be submitted by a health plan to a State under 
section 21013 shall be in the form of standard data elements and the 
transmission of such data shall be in the form of a standard 
transaction.
    ``(d) Requirement Only on Purchasing Cooperatives.--If a person 
desires to conduct any of the following transactions with a purchasing 
cooperative (as defined in section 21100(14)) as a standard 
transaction, the cooperative shall conduct such standard transaction 
and the information transmitted or received in connection with such 
transaction shall be in the form of standard data elements:
            ``(1) Enrollment and disenrollment.
            ``(2) Premium payments.
    ``(e) Requirement With Respect to Disclosure of Information.--
            ``(1) In general.--A health plan or health care provider 
        shall make the standard data elements transmitted or received 
        by such plan or provider in connection with the transactions 
        described in subsections (a), (b), and (c) or acquired under 
        section 11764(a) available for disclosure as authorized by this 
        subtitle.
            ``(2) Special rule.--In the case of a health care provider 
        that does not file claims, such provider shall be responsible 
        for making standard data elements for encounter information 
        available for disclosure as authorized by this subtitle.
    ``(f) Satisfaction of Requirements.--A health care provider, health 
plan, or consumer purchasing cooperative may satisfy the requirement 
imposed on such provider, plan, or cooperative under subsection (a), 
(b), (c), (d), or (e) by--
            ``(1) directly transmitting standard data elements;
            ``(2) submitting nonstandard data elements to a health 
        information network service certified under section 11741 for 
        processing into standard data elements and transmission; or
            ``(3) in the case of a provider, submitting data elements 
        to a plan which satisfies the requirements imposed on such 
        provider on the provider's behalf.
    ``(g) Timeliness.--A health care provider or health plan shall be 
determined to have satisfied a requirement imposed under this section 
only if the action required is completed in a timely manner, as 
determined by the Secretary. In setting standards for timeliness, the 
Secretary shall take into consideration the age and the amount of 
information being requested.

``SEC. 11722. TIMETABLES FOR COMPLIANCE WITH REQUIREMENTS.

    ``(a) Initial Compliance.--
            ``(1) In general.--Not later than 12 months after the date 
        on which standards are adopted under part II with respect to a 
        type of transaction or data elements for a type of health 
        information, a health plan, health care provider, or purchasing 
        cooperative shall comply with the requirements of this subtitle 
        with respect to such transaction or information.
            ``(2) Additional data elements.--Not later than 12 months 
        after the date on which the Secretary adopts an addition to a 
        set of data elements for health information under part II, a 
        health plan, health care provider, or purchasing cooperative 
        shall comply with the requirements of this subtitle using such 
        data elements.
    ``(b) Compliance with Modified Standards.--
            ``(1) In general.--If the Secretary adopts a modified 
        standard under part II, a health plan, health care provider, or 
        purchasing cooperative shall be required to comply with the 
        modified standard at such time as the Secretary determines 
        appropriate taking into account the time needed to comply due 
        to the nature and extent of the modification.
            ``(2) Special rule.--In the case of modifications to 
        standards that do not occur within the 12-month period 
        beginning on the date such standards are adopted, the time 
        determined appropriate by the Secretary under paragraph (1) 
        shall be no sooner than the last day of the 90-day period 
        beginning on the date such modified standard is adopted and no 
        later than the last day of the 12 month period beginning on the 
        date such modified standard is adopted.

                ``PART IV--ACCESSING HEALTH INFORMATION

``SEC. 11731. ACCESSING HEALTH INFORMATION FOR AUTHORIZED PURPOSES.

    ``(a) In General.--The Secretary shall adopt technical standards 
for appropriate persons, including health plans, health care providers, 
health information network services certified under section 11741, 
health researchers, and Federal and State agencies, to locate and 
access the health information that is available through the health 
information network due to the requirements of this subtitle. Such 
technical standards shall ensure that any request to locate or access 
information shall be authorized under subtitle C.
    ``(b) Procurement Rule for Government Agencies.--
            ``(1) In general.--Health information protection 
        organizations certified under section 11741 shall make 
        available to a Federal or State agency pursuant to a Federal 
        Acquisition Regulation (or an equivalent State system), any 
        non-identifiable health information that is requested by such 
        agency.
            ``(2) Certain information available at low cost.--If a 
        health information protection organization described in 
        paragraph (1) needs information from a health plan or health 
        care provider in order to comply with a request of a Federal or 
        State agency that is necessary to comply with a requirement 
        under this Act, such plan or provider shall make such 
        information available to such organization for a charge that 
        does not exceed the reasonable cost of transmitting the 
        information. If requested, a health information protection 
        organization that receives information under the preceding 
        sentence must make such information available to any other such 
        organization that is certified under section 11741 for a charge 
        that does not exceed the reasonable cost of transmitting the 
        information.
    ``(c) Functional Separation.--The standards adopted by the 
Secretary under subsection (a) shall ensure that any health information 
disclosed under such subsection shall not, after such disclosure, be 
used or released for an administrative, regulatory, or law enforcement 
purpose unless such disclosure was made for such purpose.
    ``(d) Public Use Functions.--Nothing in this subtitle shall be 
construed to limit the authority of a Federal or State agency to make 
non-identifiable health information available for public use functions.

``SEC. 11732. RESPONDING TO ACCESS REQUESTS.

    ``(a) In General.--The Secretary may adopt, and modify as 
appropriate, standards under which a health care provider or health 
plan shall respond to requests for access to health information 
consistent with this subtitle and subtitle C.
    ``(b) Standards Described.--The standards under subsection (a) 
shall provide--
            ``(1) for a standard format under which a provider or plan 
        will respond to each request either by satisfying the request 
        or responding with an explanation of the specific restriction 
        which results in a failure to satisfy the request; and
            ``(2) that any restrictions will not prevent a plan or 
        provider from responding to a request in a timely manner taking 
        into account the age and amount of the information being 
        requested.
    ``(c) Construction.--Nothing in this section shall be construed as 
permitting a health care provider or health plan to refuse to disclose 
any health information that is required to be disclosed by law.

``SEC. 11733. LENGTH OF TIME INFORMATION SHOULD BE ACCESSIBLE.

    ``The Secretary shall adopt standards with respect to the length of 
time any standard data elements for a type of health information should 
be accessible through the health information network.

``SEC. 11734. TIMETABLES FOR ADOPTION OF STANDARDS AND COMPLIANCE.

    ``(a) Initial Standards.--The Secretary shall adopt standards under 
this part not later than 9 months after the date of the enactment of 
this subtitle and such standards shall be effective upon adoption.
    ``(b) Modifications to Standards.--
            ``(1) In general.--Except as provided in paragraph (2), the 
        Secretary shall review the standards adopted under this part 
        and shall adopt modified standards as determined appropriate, 
        but no more frequently than once every 6 months. Any 
        modification to standards shall be completed in a manner which 
        minimizes the disruption and cost of compliance. Any 
        modifications to standards adopted under this part shall be 
        effective upon adoption.
            ``(2) Special rule.--The Secretary shall not adopt 
        modifications to any standards adopted under this part during 
        the 12-month period beginning on the date such standards are 
        adopted unless the Secretary determines that a modification is 
        necessary in order to permit compliance with the requirements 
        of this part.

  ``PART V--STANDARDS AND CERTIFICATION FOR HEALTH INFORMATION NETWORK

``SEC. 11741. STANDARDS AND CERTIFICATION FOR HEALTH INFORMATION 
              NETWORK SERVICES.

    ``(a) Standards for Operation.--The Secretary shall establish 
standards with respect to the operation of health information network 
services, including standards ensuring that--
            ``(1) such services develop, operate, and cooperate with 
        one another to form the health information network;
            ``(2) such services meet all of the requirements under 
        subtitle C that are applicable to such services;
            ``(3) such services make public information concerning 
        their performance, as measured by uniform indicators such as 
        accessibility, transaction responsiveness, administrative 
        efficiency, reliability, dependability, and any other indicator 
        determined appropriate by the Secretary;
            ``(4) such services have security procedures that are 
        consistent with the privacy requirements under subtitle C, 
        including secure methods of access to and transmission of data;
            ``(5) such services, if they are part of a larger 
        organization, have policies and procedures in place which 
        isolate their activities with respect to processing information 
        in a manner that prevents access to such information by such 
        larger organization.
    ``(b) Certification by the Secretary.--
            ``(1) Establishment.--Not later than 12 months after the 
        date of the enactment of this subtitle, the Secretary shall 
        establish a certification procedure for health information 
        network services which ensures that certified services are 
        qualified to meet the requirements of this subtitle and the 
        standards established by the Secretary under this section. Such 
        certification procedure shall be implemented in a manner that 
        minimizes the costs and delays of operations for such services.
            ``(2) Application.--Each entity desiring to be certified as 
        a health information network service shall apply to the 
        Secretary for certification in a form and manner determined 
        appropriate by the Secretary.
            ``(3) Audits and reports.--The procedure established under 
        paragraph (1) shall provide for audits by the Secretary and 
        reports by an entity certified under this section as the 
        Secretary determines appropriate in order to monitor such 
        entity's compliance with the requirements of this subtitle, 
        subtitle C, and the standards established by the Secretary 
        under this section.
            ``(4) Recertification.--A health information network 
        service must be recertified under this subsection at least 
        every 3 years.
    ``(c) Loss of Certification.--
            ``(1) Mandatory termination.--Except as provided in 
        paragraph (3), if a health information network service violates 
        a requirement imposed on such service under subtitle C, its 
        certification under this section shall be terminated unless the 
        Secretary determines that appropriate corrective action has 
        been taken.
            ``(2) Discretionary termination.--If a health information 
        network service violates a requirement or standard imposed 
        under this subtitle and a penalty has been imposed under 
        section 11751, the Secretary shall review the certification of 
        such service and may terminate such certification.
            ``(3) Conditional certification.--The Secretary may 
        establish a procedure under which a health information network 
        service may remain certified on a conditional basis if the 
        service is operating consistently with a plan intended to 
        correct any violations described in paragraphs (1) or (2). Such 
        procedure may provide for the appointment of a trustee to 
        continue operation of the service until the requirements for 
        full certification are met.
    ``(d) Certification by Private Entities.--The Secretary may 
designate private entities to conduct the certification procedures 
established by the Secretary under this section. A health information 
network service certified by such an entity in accordance with such 
designation shall be considered to be certified by the Secretary.

``SEC. 11742. ENSURING AVAILABILITY OF INFORMATION.

    ``The Secretary shall establish a procedure under which a health 
plan or health care provider which does not have the ability to 
transmit standard data elements directly or does not have access to a 
health information network service certified under section 11741 shall 
be able to make health information available for disclosure as 
authorized by this subtitle.

                          ``PART VI--PENALTIES

``SEC. 11751. GENERAL PENALTY FOR FAILURE TO COMPLY WITH REQUIREMENTS 
              AND STANDARDS.

    ``(a) In General.--Except as provided in subsection (b), the 
Secretary shall impose on any person that violates a requirement or 
standard imposed under this subtitle a penalty of not more than $1,000 
for each violation. The provisions of section 1128A (other than 
subsections (a) and (b) and the second sentence of subsection (f)) 
shall apply to the imposition of a civil money penalty under this 
subsection in the same manner as such provisions apply to the 
imposition of a penalty under section 1128A.
    ``(b) Limitations.--
            ``(1) Noncompliance not discovered exercising reasonable 
        diligence.--A penalty may not be imposed under subsection (a) 
        if it is established to the satisfaction of the Secretary that 
        the person liable for the penalty did not know, and by 
        exercising reasonable diligence would not have known, that such 
        person failed to comply with the requirement or standard 
        described in subsection (a).
            ``(2) Failures due to reasonable cause.--
                    ``(A) In general.--Except as provided in 
                subparagraphs (B) and (C), a penalty may not be imposed 
                under subsection (a) if--
                            ``(i) the failure to comply was due to 
                        reasonable cause and not to willful neglect; 
                        and
                            ``(ii) the failure to comply is corrected 
                        during the 30-day period beginning on the 1st 
                        date the person liable for the penalty knew, or 
                        by exercising reasonable diligence would have 
                        known, that the failure to comply occurred.
                    ``(B) Extension of period.--
                            ``(i) No penalty.--The period referred to 
                        in subparagraph (A)(ii) may be extended as 
                        determined appropriate by the Secretary based 
                        on the nature and extent of the failure to 
                        comply.
                            ``(ii) Assistance.--If the Secretary 
                        determines that a health plan, health care 
                        provider, or purchasing cooperative failed to 
                        comply because such person was unable to 
                        comply, the Secretary may provide technical 
                        assistance to such person. Such assistance 
                        shall be provided in any manner determined 
                        appropriate by the Secretary.
            ``(3) Reduction.--In the case of a failure to comply which 
        is due to reasonable cause and not to willful neglect, any 
        penalty under subsection (a) that is not entirely waived under 
        paragraph (2) may be waived to the extent that the payment of 
        such penalty would be excessive relative to the compliance 
        failure involved.

                  ``PART VII--MISCELLANEOUS PROVISIONS

``SEC. 11761. IMPOSITION OF ADDITIONAL REQUIREMENTS.

    ``(a) Data Element Standards.--A person may not impose a standard 
on another person that is in addition to the standards adopted by the 
Secretary under section 11712 unless--
            ``(1) such person voluntarily agrees to such standard; or
            ``(2) a waiver is granted under subsection (c) to impose 
        such standard.
    ``(b) Transactions and Access Standards.--A person may not impose a 
standard on another person that is in addition to the standards adopted 
by the Secretary under section 11713 or 11731 unless such person 
voluntarily agrees to such standard.
    ``(c) Conditions for Waivers.--
            ``(1) In general.--A person may request a waiver from the 
        Secretary in order to require another person to comply with a 
        standard that is in addition to the standards adopted by the 
        Secretary under section 11712.
            ``(2) Consideration of waiver requests.--No waiver may be 
        granted unless the Secretary determines that the value of the 
        data to be exchanged for research or other purposes 
        significantly outweighs the administrative cost of the 
        additional standard taking into consideration the burden of the 
        timing of the imposition of the additional standard.
            ``(3) Anonymous reporting.--If a person attempts to impose 
        a standard in addition to the standards adopted by the 
        Secretary under section 11712, the person on whom such 
        additional standard is being imposed may contact the Secretary. 
        The Secretary shall develop a procedure under which the 
        contacting person shall remain anonymous. The Secretary shall 
        notify the person imposing the additional standard that the 
        additional standard may not be imposed unless the other person 
        voluntarily agrees to such standard or a waiver is obtained 
        under this subsection.

``SEC. 11762. EFFECT ON STATE LAW.

    ``(a) In General.--A provision, requirement, or standard under this 
subtitle shall supersede any contrary provision of State law, 
including--
            ``(1) a provision of State law that requires medical or 
        health plan records (including billing information) to be 
        maintained or transmitted in written rather than electronic 
        form, and
            ``(2) a provision of State law which provides for 
        requirements or standards that are more stringent than the 
        requirements or standards under this subtitle;
except where the Secretary determines that the provision is necessary 
to prevent fraud and abuse, with respect to controlled substances, or 
for other purposes.
    ``(b) Public Health Reporting.--Nothing in this subtitle shall be 
construed to invalidate or limit the authority, power, or procedures 
established under any law providing for the reporting of disease or 
injury, child abuse, birth, or death, public health surveillance, or 
public health investigation or intervention.

``SEC. 11764. HEALTH INFORMATION CONTINUITY.

    ``(a) Information Held by Health Plans and Providers.--If a health 
plan or health care provider takes any action that would threaten the 
continued availability of the standard data elements of health 
information held by such plan or provider, such data elements shall be 
obtained by the State in which such plan or provider is located. The 
State shall ensure that such data elements are transferred to a health 
plan or health care provider in accordance with procedures established 
by the Secretary.
    ``(b) Information Held by Health Information Network Services.--If 
a health information network service certified under section 11741 
loses its certified status or takes any action that would threaten the 
continued availability of the standard data elements of health 
information held by such service, such data elements shall be 
transferred to another health information network service certified 
under section 11741, as designated by the Secretary.

``SEC. 11765. PROTECTION OF COMMERCIAL INFORMATION.

    ``In adopting standards under this subtitle, the Secretary shall 
not require disclosure of trade secrets and confidential commercial 
information by entities operating in the health information network 
except as required by law.

``SEC. 11766. PAYMENT FOR HEALTH CARE SERVICES OR HEALTH PLAN PREMIUMS.

    ``Nothing in this subtitle shall be construed to prohibit payments 
for health care services or health plan premiums from being made by 
debit, credit, or other payment cards or numbers or other electronic 
payment means.

``SEC. 11767. HEALTH SECURITY CARDS.

    ``(a) In General.--The Secretary shall establish standards relating 
to the form of health security cards issued by health plans and the 
information to be encoded electronically on such cards.
    ``(b) Form Described.--The standard form for a health security card 
shall be a card which--
            ``(1) is made of plastic or a similar durable material with 
        a useful life of at least 5 years;
            ``(2) is resistant to counterfeiting;
            ``(3) can store information that can be encoded and 
        retrieved electronically;
            ``(4) can be produced in a cost-effective manner and used 
        in all types of health care locations; and
            ``(5) specifies on its face the social security account 
        number assigned to the individual who is the cardholder by the 
        Secretary under section 205(c)(2).
    ``(c) Information Described.--The information electronically 
encoded on a health security card shall include the identity of the 
individual to whom the card was issued, including such individual's 
personal health identifier specified under section 11712(c)(1), and may 
include any other information that the Secretary determines may be 
useful in order for the card to serve the purpose of easing access to 
and paying for health care services. A health plan shall make available 
to an individual cardholder, upon demand by such individual, a printed 
copy of all information electronically encoded on such individual's 
health security card.

``SEC. 11768. MISUSE OF HEALTH SECURITY CARD OR PERSONAL HEALTH 
              IDENTIFIER.

    ``(a) Health Security Card.--A person who--
            ``(1) requires the display of, requires the use of, or uses 
        a health security card for any purpose other than obtaining or 
        paying for health care;
            ``(2) falsely makes, forges, counterfeits or alters a 
        health security card;
            ``(3) without lawful authority prints, photographs, or 
        makes any impression in the likeness of any health security 
        card; or
            ``(4) sells, transfers, or otherwise delivers a false, 
        forged, counterfeited, or altered health security card knowing 
        that the card is false, forged, counterfeited, or altered;
shall be fined not more than $25,000, imprisoned not more than 2 years, 
or both.
    ``(b) Personal Health Identifier.--A person who requires the 
disclosure of, requires the use of, or uses an individual's personal 
health identifier for any purpose that is not authorized by the 
Secretary, shall be fined not more than $25,000, imprisoned not more 
than 2 years, or both.

``SEC. 11769. DIRECT BILLING FOR CLINICAL LABORATORY SERVICES.

    ``(a) In General.--
            ``(1) Requirement.--Except as provided in paragraph (2), in 
        the case of a claim for payment for a clinical diagnostic 
        laboratory test for which payment may otherwise be made, 
        payment may be made only to the person who, or entity which, 
        performed or supervised the test.
            ``(2) Exceptions.--Payment for a clinical diagnostic 
        laboratory test may be made to a physician with whom the 
        physician who performed the test shares a practice.
    ``(b) Additional Exceptions.--The Secretary may, by regulation, 
establish exceptions to the requirement under subsection (a)(1) that 
are in addition to the exceptions under subsection (a)(2). In 
establishing such exceptions the Secretary shall take into account--
            ``(1) circumstances in which an individual's privacy might 
        be violated; or
            ``(2) the need for confidentiality on the part of the 
        person furnishing the test.

``SEC. 11770. AUTHORIZATION OF APPROPRIATIONS.

    ``There are authorized to be appropriated such sums as may be 
necessary to carry out the purposes of this subtitle.

                ``PART VIII--ASSISTANCE TO THE SECRETARY

``SEC. 11771. GENERAL REQUIREMENT ON SECRETARY.

    ``In complying with any requirements imposed under this subtitle, 
the Secretary shall rely on recommendations of the Health Information 
Advisory Committee established under section 11772 and shall consult 
with appropriate Federal agencies.

``SEC. 11772. HEALTH INFORMATION ADVISORY COMMITTEE.

    ``(a) Establishment.--There is established a committee to be known 
as the Health Care Information Advisory Committee.
    ``(b) Duty.--
            ``(1) In general.--The committee shall--
                    ``(A) provide assistance to the Secretary in 
                complying with the requirements imposed on the 
                Secretary under this subtitle and subtitle C;
                    ``(B) be generally responsible for advising the 
                Secretary and the Congress on the status of the health 
                information network; and
                    ``(C) make recommendations to correct any problems 
                that may occur in the network's implementation and 
                ongoing operations and to refine and improve the 
                network.
            ``(2) Technical assistance.--In performing its duties under 
        this subsection, the committee shall receive technical 
        assistance from appropriate Federal agencies.
    ``(c) Membership.--
            ``(1) In general.--The committee shall consist of 15 
        members to be appointed by the President not later than 60 days 
        after the date of the enactment of this subtitle. The President 
        shall designate 1 member as the Chair.
            ``(2) Expertise.--The membership of the committee shall 
        consist of individuals who are of recognized standing and 
        distinction and who possess the demonstrated capacity to 
        discharge the duties imposed on the committee.
            ``(3) Terms.--Each member of the committee shall be 
        appointed for a term of 5 years, except that the members first 
        appointed shall serve staggered terms such that the terms of no 
        more than 3 members expire at one time.
            ``(4) Vacancies.--
                    ``(A) In general.--A vacancy on the committee shall 
                be filled in the manner in which the original 
                appointment was made and shall be subject to any 
                conditions which applied with respect to the original 
                appointment.
                    ``(B) Filling unexpired term.--An individual chosen 
                to fill a vacancy shall be appointed for the unexpired 
                term of the member replaced.
                    ``(C) Expiration of terms.--The term of any member 
                shall not expire before the date on which the member's 
                successor takes office.
            ``(5) Conflicts of interest.--Members of the committee 
        shall disclose upon appointment to the committee or at any 
        subsequent time that it may occur, conflicts of interest.
    ``(d) Meetings.--
            ``(1) In general.--Except as provided in paragraph (2), the 
        committee shall meet at the call of the Chair.
            ``(2) Initial meeting.--Not later than 30 days after the 
        date on which all members of the committee have been appointed, 
        the committee shall hold its first meeting.
            ``(3) Quorum.--A majority of the members of the committee 
        shall constitute a quorum, but a lesser number of members may 
        hold hearings.
    ``(e) Power to Hold Hearings.--The committee may hold such 
hearings, sit and act at such times and places, take such testimony, 
and receive such evidence as the committee considers advisable to carry 
out the purposes of this section.
    ``(f) Other Administrative Provisions.--Subparagraphs (C), (D), and 
(H) of section 1886(e)(6) shall apply to the committee in the same 
manner as they apply to the Prospective Payment Assessment Commission.
    ``(g) Reports.--
            ``(1) In general.--The committee shall annually prepare and 
        submit to Congress and the Secretary a report including at 
        least an analysis of--
                    ``(A) the status of the health information network 
                established under this subtitle, including whether the 
                network is fulfilling the purpose described in section 
                11701;
                    ``(B) the savings and costs of the network;
                    ``(C) the activities of health information network 
                services certified under section 11741, health care 
                providers, health plans, and other entities using the 
                network to exchange health information;
                    ``(D) the extent to which entities described in 
                subparagraph (C) are meeting the standards adopted 
                under this subtitle and working together to form an 
                integrated network that meets the needs of its users;
                    ``(E) the extent to which entities described in 
                subparagraph (C) are meeting the privacy and security 
                protections of subtitle C;
                    ``(F) the number and types of penalties assessed 
                for noncompliance with the standards adopted under this 
                subtitle;
                    ``(G) whether the Federal Government and State 
                Governments are receiving information of sufficient 
                quality to meet their responsibilities under the Health 
                Security Act;
                    ``(H) any problems with respect to implementation 
                of the network;
                    ``(I) the extent to which timetables under this 
                subtitle for the adoption and implementation of 
                standards are being met; and
                    ``(J) any legislative recommendations related to 
                the health information network.
            ``(2) Availability to the public.--Any information in the 
        report submitted to Congress under paragraph (1) shall be made 
        available to the public unless such information may not be 
        disclosed by law.
    ``(h) Duration.--Notwithstanding section 14(a) of the Federal 
Advisory Committee Act, the committee shall continue in existence until 
otherwise provided by law.
    ``(i) Authorization of Appropriations.--
            ``(1) In general.--There are authorized to be appropriated 
        such sums as may be necessary to carry out the purposes of this 
        section.
            ``(2) Availability.--Any sums appropriated under the 
        authorization contained in this subsection shall remain 
        available, without fiscal year limitation, until expended.

    ``PART IX--DEMONSTRATION PROJECTS FOR COMMUNITY-BASED CLINICAL 
                          INFORMATION SYSTEMS

``SEC. 11781. GRANTS FOR DEMONSTRATION PROJECTS.

    ``(a) In General.--The Secretary may make grants for demonstration 
projects to promote the development and use of electronically 
integrated community-based clinical information systems and 
computerized patient medical records.
    ``(b) Applications.--
            ``(1) Submission.--To apply for a grant under this part for 
        any fiscal year, an applicant shall submit an application to 
        the Secretary in accordance with the procedures established by 
        the Secretary.
            ``(2) Criteria for approval.--The Secretary may not approve 
        an application submitted under paragraph (1) unless the 
        application includes assurances satisfactory to the Secretary 
        regarding the following:
                    ``(A) Use of existing technology.--Funds received 
                under this part will be used to apply 
                telecommunications and information systems technology 
                that is in existence on the date the application is 
                submitted in a manner that improves the quality of 
                health care, reduces the costs of such care, and 
                protects the privacy and confidentiality of information 
                relating to the physical or mental condition of an 
                individual.
                    ``(B) Use of existing information systems.--Funds 
                received under this part will be used--
                            ``(i) to enhance telecommunications or 
                        information systems that are operating on the 
                        date the application is submitted;
                            ``(ii) to integrate telecommunications or 
                        information systems that are operating on the 
                        date the application is submitted; or
                            ``(iii) to connect additional users to 
                        telecommunications or information networks or 
                        systems that are operating on the date the 
                        application is submitted.
                    ``(C) Matching funds.--The applicant shall make 
                available funds for the demonstration project in an 
                amount that equals at least 20 percent of the cost of 
                the project.
    ``(c) Geographic Diversity.--In making any grants under this part, 
the Secretary shall, to the extent practicable, make grants to persons 
representing different geographic areas of the United States, including 
urban and rural areas.
    ``(d) Review and Sanctions.--The Secretary shall review at least 
annually the compliance of a person receiving a grant under this part 
with the provisions of this part. The Secretary shall establish a 
procedure for determining whether such a person has failed to comply 
substantially within the provisions of this part and the sanctions to 
be imposed for any such noncompliance.
    ``(e) Annual Report.--The Secretary shall submit an annual report 
to the President for transmittal to Congress containing a description 
of the activities carried out under this part.
    ``(f) Authorization of Appropriations.--There are authorized to be 
appropriated such sums as may be necessary to carry out the purposes of 
this section.''.
            (2) Conforming amendments.--(A) Title XI of the Social 
        Security Act (42 U.S.C. 1301 et seq.) is amended by striking 
        the title and inserting the following:

    ``TITLE XI--GENERAL PROVISIONS, PEER REVIEW, AND ADMINISTRATIVE 
                             SIMPLIFICATION

           ``Subtitle A--General Provisions and Peer Review''

            (B) Title XI of the Social Security Act (42 U.S.C. 1301 et 
        seq.) is amended by striking each reference to ``this title'' 
        and inserting ``this subtitle''.

SEC. 402. PRIVACY OF HEALTH INFORMATION UNDER THE SOCIAL SECURITY ACT.

    (a) In General.--Title XI of the Social Security Act (42 U.S.C. 
1301 et seq.), as amended by section 401, is amended by adding at the 
end the following new subtitle:

              ``Subtitle C--Privacy of Health Information

                    ``table of contents of subtitle

              ``Subtitle C--Privacy of Health Information

                   ``Part I--Findings and Definitions

        ``Sec. 11801. Findings and purposes.
        ``Sec. 11802. Definitions.
                   ```subpart a--general provisionss
        ``Sec. 11811. General rules regarding disclosure.
        ``Sec. 11812. Authorizations for disclosure of protected health 
                            information.
        ```subpart b--specific disclosures relating to patientvices.
        ``Sec. 11821. Disclosures for treatment and financial and 
                            administrative transactions.
        ``Sec. 11822. Next of kin and directory information.
  ``subpart c--disclosure for oversight, public health, and research 
                                purposes
        ``Sec. 11831. Oversight.
        ``Sec. 11832. Public health.
     ``subpart d--disclosure for judicial, administrative, and law 
                          enforcement purposes
        ``Sec. 11841. Judicial and administrative purposes.
   ``subpart e--disclosure pursuant to government subpoena or warrant
        ``Sec. 11851. Government subpoenas and warrants.
        ``Sec. 11852. Access procedures for law enforcement subpoenas 
                            and warrants.
        ``Sec. 11853. Challenge procedures for law enforcement warrants 
       ``subpart f--disclosure pursuant to private party subpoena
        ``Sec. 11854. Private party subpoenas.
        ``Sec. 11855. Access procedures for private party subpoenas.
        ``Sec. 11856. Challenge procedures for private party subpoenas.
   ``Part III--Procedures for Ensuring Security of Protected Health 
                ``subpart a--establishment of safeguards
        ``Sec. 11861. Establishment of safeguards.
``subpart b--review of protected health information by subjects of the 
                              information
        ``Sec. 11871. Inspection of protected health information.
        ``Sec. 11872. Amendment of protected health information.
        ``S``subpart c--standards for electronic disclosures
        ``Sec. 11882. Standards for electronic disclosures.
           ``subpart a--no sanctions for permissible actions
        ``Sec. 11891. No liability for permissible disclosures.
        ``Sec. 11892. No liability for institutional review board 
                            determinations.
        ``Sec. 11893. ``subpart b--civil sanctions.
        ``Sec. 11901. Civil penalty.
        ``Sec. 11902``subpart c--criminal sanctions
        ``Sec. 11911. Wrongful disclosure of protected health 
                            information.
                  ``Part V--Administrative Provisions

        ``Sec. 11921. Relationship to other laws.
        ``Sec. 11922. Rights of incompetents.
        ``Sec. 11923. Exercise of rights.

                   ``PART I--FINDINGS AND DEFINITIONS

``SEC. 11801. FINDINGS AND PURPOSES.

    ``(a) Findings.--The Congress finds as follows:
            ``(1) The improper disclosure of individually identifiable 
        health care information may cause significant harm to an 
        individual's interests in privacy, health care, and reputation 
        and may unfairly affect the ability of an individual to obtain 
        employment, education, insurance, and credit.
            ``(2) The movement of people and health care related 
        information across State lines, the availability of, access to, 
        and exchange of health care related information with Federally 
        funded health care systems, the medicare program under title 
        XVIII, and the medicaid program under title XIX, through 
        automated data banks and networks, and the emergence of other 
        multistate health care providers and payors create a need for a 
        uniform Federal law governing the disclosure of health care 
        information.
    ``(b) Purpose.--The purpose of this subtitle is to establish 
effective mechanisms to protect the privacy of individuals with respect 
to individually identifiable health care information that is created or 
maintained as part of health treatment, enrollment, payment, testing, 
or research processes.

``SEC. 11802. DEFINITIONS.

    ``(a) Terms Relating to Protected Health Information.--In this 
subtitle:
            ``(1) Protected health information.--The term `protected 
        health information' means any information, including 
        demographic information collected from an individual, whether 
        oral or recorded in any form or medium, that--
                    ``(A) is created or received by a health care 
                provider, health plan, health oversight agency, health 
                researcher, public health authority, employer, life 
                insurer, school or university, or certified health 
                information network service; and
                    ``(B) relates to the past, present, or future 
                physical or mental health or condition of an 
                individual, the provision of health care to an 
                individual, or the past, present, or future payment for 
                the provision of health care to an individual, and--
                            ``(i) identifies an individual; or
                            ``(ii) with respect to which there is a 
                        reasonable basis to believe that the 
                        information can be used to identify an 
                        individual.
            ``(2) Disclose.--The term `disclose', when used with 
        respect to protected health information, means to provide 
        access to the information, but only if such access is provided 
        to a person other than the individual who is the subject of the 
        information.
    ``(b) Terms Relating to Health Care System Participants.--In this 
subtitle:
            ``(1) Health information trustee.--The term `health 
        information trustee' means--
                    ``(A) a health care provider, health plan, health 
                oversight agency, certified health information network 
                service, employer, life insurer, or school or 
                university insofar as it creates, receives, maintains, 
                uses, or transmits protected health information;
                    ``(B) any person who obtains protected health 
                information under section 11823, 11832, 11833, 11841, 
                11842, 11851, or 11854; and
                    ``(C) any employee or agent of a person covered 
                under subparagraphs (A) or (B).
            ``(2) Health care.--The term `health care'--
                    ``(A) means--
                            ``(i) a preventative, diagnostic, 
                        therapeutic, rehabilitative, maintenance, or 
                        palliative care, counseling, service, or 
                        procedure--
                                    ``(I) with respect to the physical 
                                or mental condition of an individual; 
                                or
                                    ``(II) affecting the structure or 
                                function of the human body or any part 
                                of the human body; or
                            ``(ii) any sale or dispensing of a drug, 
                        device, equipment, or other item to an 
                        individual, or for the use of an individual, 
                        pursuant to a prescription; but
                    ``(B) does not include any item or service that is 
                not furnished for the purpose of examining, 
                maintaining, or improving the health of an individual.
            ``(3) Health care provider.--The term `health care 
        provider' means a person who is licensed, certified, 
        registered, or otherwise authorized by law to provide an item 
        or service that constitutes health care in the ordinary course 
        of business or practice of a profession.
            ``(4) Health oversight agency.--The term `health oversight 
        agency' means a person who--
                    ``(A) performs or oversees the performance of an 
                assessment, evaluation, determination, or investigation 
                relating to the licensing, accreditation, or 
                certification of health care providers; or
                    ``(B)(i) performs or oversees the performance of an 
                assessment, evaluation, determination, or investigation 
                relating to the effectiveness of, compliance with, or 
                applicability of legal, fiscal, medical, or scientific 
                standards or aspects of performance related to the 
                delivery of, or payment for, health care or relating to 
                health care fraud or fraudulent claims for payment 
                regarding health; and
                    ``(ii) is a public agency, acting on behalf of a 
                public agency, acting pursuant to a requirement of a 
                public agency, or carrying out activities under a 
                Federal or State law governing the assessment, 
                evaluation, determination, or investigation described 
                in clause (i).
            ``(5) Health plan.--The term `health plan' shall have the 
        meaning given such term under section 11702.
            ``(6) Health researcher.--The term `health researcher' 
        means a person who conducts a biomedical, public health, 
        epidemiological, health services, or health statistics research 
        project or a research project on social and behavioral factors 
        relating to health.
            ``(7) Institutional review board.--The term `institutional 
        review board' means--
                    ``(A) a board established in accordance with 
                regulations of the Secretary under section 491(a) of 
                the Public Health Service Act;
                    ``(B) a similar board established by the Secretary 
                for the protection of human subjects in research 
                conducted by the Secretary; or
                    ``(C) a similar board established under regulations 
                of a Federal Government authority other than the 
                Secretary.
            ``(8) Public health authority.--The term `public health 
        authority' means an authority or instrumentality of the United 
        States, a State, or a political subdivision of a State that is 
        (A) responsible for public health matters; and (B) engaged in 
        such activities as injury reporting, public health 
        surveillance, and public health investigation or intervention.
    ``(c) References to Certified Entities.--In this subtitle:
            ``(1) Certified health information network service.--The 
        term `certified health information network service' means a 
        health information service (as defined under section 11702) 
        that is certified under section 11741.
            ``(2) Certified health information protection 
        organization.--The term `certified health information 
        protection organization' means a health information protection 
        organization (as defined in section 11702) that is certified 
        under section 11741.
    ``(d) Other Terms.--In this subtitle:
            ``(1) Individual representative.--The term `individual 
        representative' means any individual legally empowered to make 
        decisions concerning the provision of health care to an 
        individual (where the individual lacks the legal capacity under 
        State law to make such decisions) or the administrator or 
        executor of the estate of a deceased individual.
            ``(2) Law enforcement inquiry.--The term `law enforcement 
        inquiry' means an investigation or official proceeding 
        inquiring into whether there is a violation of, or failure to 
        comply with, any criminal or civil statute or any regulation, 
        rule, or order issued pursuant to such a statute.
            ``(3) Person.--The term `person' includes an authority of 
        the United States, a State, or a political subdivision of a 
        State.

                   ``PART II--AUTHORIZED DISCLOSURES

                    ``Subpart A--General Provisions

``SEC. 11811. GENERAL RULES REGARDING DISCLOSURE.

    ``(a) General Rule.--A health information trustee may disclose 
protected health information only for a purpose that is authorized 
under this subtitle.
    ``(b) Disclosure within a trustee.--A health information trustee 
may disclose protected health information to an officer, employee, or 
agent of the trustee, but only for a purpose that is compatible with 
and related to the purpose for which the information was collected or 
received by that trustee.
    ``(c) Scope of disclosure.--
            ``(1) In general.--Every disclosure of protected health 
        information by a health information trustee shall be limited to 
        the minimum amount of information necessary to accomplish the 
        purpose for which the information is disclosed.
            ``(2) Regulations.--The Secretary, after notice and 
        opportunity for public comment, may issue regulations under 
        paragraph (1), which shall take into account the technical 
        capabilities of the record systems used to maintain protected 
        health information and the costs of limiting disclosure.
    ``(d) No General Requirement to Disclose.--Nothing in this subtitle 
that permits a disclosure of health information shall be construed to 
require such disclosure.
    ``(e) Use and Redisclosure of Information.--The protected health 
information received under a disclosure permitted by the subtitle may 
not be used or disclosed unless the use or disclosure is necessary to 
fulfill the purpose for which the information was obtained and is not 
otherwise prohibited by law. Protected health information about an 
individual that is disclosed under this subtitle may not be used in, or 
disclosed to any person for use in, any administrative, civil, or 
criminal action or investigation directed against the individual unless 
specifically permitted by this subtitle.
    ``(f) Identification of Disclosed Information as Protected 
Information.--
            ``(1) In general.--Except with respect to protected health 
        information that is disclosed under section 11823 and except as 
        provided in paragraph (2), a health information trustee may not 
        disclose protected health information unless such information 
        is clearly identified as protected health information that is 
        subject to this subtitle.
            ``(2) Routine disclosures subject to written agreement.--A 
        health information trustee who routinely discloses protected 
        health information to a person may satisfy the identification 
        requirement in paragraph (1) through a written agreement 
        between the trustee and the person with respect to the 
        protected health information.
    ``(g) Construction.--Nothing in this subtitle shall be construed to 
limit the ability of a health information trustee to charge a 
reasonable fee for the disclosure or reproduction of health 
information.
    ``(h) Information in Which Providers are Identified.--The 
Secretary, after notice and opportunity for public comment, may issue 
regulations protecting information identifying providers in order to 
promote the availability of health care services.

``SEC. 11812. AUTHORIZATIONS FOR DISCLOSURE OF PROTECTED HEALTH 
              INFORMATION.

    ``(a) Written Authorizations.--A health information trustee may 
disclose protected health information pursuant to an authorization 
executed by the individual who is the subject of the information, if 
each of the following requirements is met:
            ``(1) Writing.--The authorization is in writing, signed by 
        the individual who is the subject of the information, and dated 
        on the date of such signature.
            ``(2) Separate form.--The authorization is not on a form 
        used to authorize or facilitate the provision of, or payment 
        for, health care.
            ``(3) Trustee described.--The trustee is specifically named 
        or generically described in the authorization as authorized to 
        disclose such information.
            ``(4) Recipient described.--The person to whom the 
        information is to be disclosed is specifically named or 
        generically described in the authorization as a person to whom 
        such information may be disclosed.
            ``(5) Statement of intended disclosures.--The authorization 
        contains an acknowledgment that the individual who is the 
        subject of the information has read a statement of the 
        disclosures that the person to receive the protected health 
        information intends to make, which statement shall be in 
        writing, on a form that is distinct from the authorization for 
        disclosure, and which statement must be received by the 
        individual authorizing the disclosure on or before such 
        authorization is executed.
            ``(6) Information described.--The information to be 
        disclosed is described in the authorization.
            ``(7) Expiration date specified.--The authorization 
        specifies a date or event upon which the authorization expires, 
        which shall not exceed 2 years from the date of the execution 
        of the authorization.
            ``(8) Authorization timely received.--The authorization is 
        received by the trustee during a period described in subsection 
        (c)(1).
            ``(9) Disclosure timely made.--The disclosure occurs during 
        a period described in subsection (c)(2).
    ``(b) Authorizations Requested in Connection With Provision of 
Health Care.--
            ``(1) In general.--A health information trustee may not 
        request that an individual provide to any other person an 
        authorization described in subsection (a) on a day on which--
                    ``(A) the trustee provides health care to the 
                individual requested to provide the authorization; or
                    ``(B) in the case of a trustee that is a health 
                facility, the individual is admitted into the facility 
                as a resident or inpatient in order to receive health 
                care.
            ``(2) Exception.--Paragraph (1) does not apply if a health 
        information trustee requests that an individual provide an 
        authorization described in subsection (a) for the purpose of 
        assisting the individual in obtaining counseling or social 
        services from a person other than the trustee.
    ``(c) Time Limitations on Authorizations.--
            ``(1) Receipt by trustee.--For purposes of subsection 
        (a)(8), an authorization is timely received if it is received 
        by the trustee during--
                    ``(A) the 1-year period beginning on the date on 
                which the authorization is signed under subsection 
                (a)(1), if the authorization permits the disclosure of 
                protected health information to a person who provides 
                health counseling or social services to individuals; or
                    ``(B) the 30-day period beginning on the date on 
                which the authorization is signed under subsection 
                (a)(1), if the authorization permits the disclosure of 
                protected health information to a person other than a 
                person described in subparagraph (A).
            ``(2) Disclosure by trustee.--For purposes of subsection 
        (a)(9), a disclosure is timely made if it occurs before the 
        date or event specified in the authorization upon which the 
        authorization expires.
    ``(d) Revocation or Amendment of Authorization.--
            ``(1) In general.--An individual may in writing revoke or 
        amend an authorization described in subsection (a), in whole or 
        in part, at any time, except when--
                    ``(A) disclosure of protected health information 
                has been authorized to permit validation of 
                expenditures for health care; or
                    ``(B) action has been taken in reliance on the 
                authorization.
            ``(2) Notice of revocation.--A health information trustee 
        who discloses protected health information pursuant to an 
        authorization that has been revoked shall not be subject to any 
        liability or penalty under this subtitle if--
                    ``(A) the reliance was in good faith;
                    ``(B) the trustee had no notice of the revocation; 
                and
                    ``(C) the disclosure was otherwise in accordance 
                with the requirements of this subtitle.
    ``(e) Deceased Individual.--The Secretary shall develop and 
establish through regulation a procedure for obtaining protected health 
information relating to a deceased individual when there is no 
individual representative for such individual.
    ``(f) Model Authorizations.--The Secretary, after notice and 
opportunity for public comment, shall develop and disseminate model 
written authorizations of the type described in subsection (a) and 
model statements of intended disclosures of the type described in 
subsection (a)(5).
    ``(g) Copy.--A health information trustee who discloses protected 
health information pursuant to an authorization under this section 
shall maintain a copy of the authorization.

``SEC. 11813. CERTIFIED HEALTH INFORMATION NETWORK SERVICES.

    ``(a) In General.--A health information trustee may disclose 
protected health information to a certified health information network 
service acting as an agent of the trustee for any purpose permitted by 
this subtitle. Such a service, acting as an agent of a trustee, may 
disclose protected health information to another person as permitted 
under this subtitle to facilitate the completion of the purpose for 
which such information was disclosed to the service.
    ``(b) Certified Health Information Protection Organizations.--A 
health information trustee may disclose protected health information to 
a certified health information protection organization for the purpose 
of creating non-identifiable health information (as defined in section 
11702).

         ``Subpart B--Specific Disclosures Relating to Patient

``SEC. 11821. DISCLOSURES FOR TREATMENT AND FINANCIAL AND 
              ADMINISTRATIVE TRANSACTIONS.

    ``(a) Health Care Treatment.--A health care provider, health plan, 
employer, or person who receives protected health information under 
section 11823, may disclose protected health information to a health 
care provider for the purpose of providing health care to an individual 
if the individual who is the subject of the information has not 
previously objected in writing to the disclosure.
    ``(b) Disclosure to Health Plans for Financial and Administrative 
Purposes.--A health care provider or employer may disclose protected 
health information to a health plan for the purpose of providing for 
the payment for, or reviewing the payment of, health care furnished to 
an individual.
    ``(c) Disclosure by Health Plans for Financial and Administrative 
Purposes.--A health plan may disclose protected health information to a 
health care provider or a health plan for the purpose of providing for 
the payment for, or reviewing the payment of, health care furnished to 
an individual.

``SEC. 11822. NEXT OF KIN AND DIRECTORY INFORMATION.

    ``(a) Next of Kin.--A health care provider or person who receives 
protected health information under section 11823 may disclose protected 
health information to the next of kin, an individual representative of 
the individual who is the subject of the information, or an individual 
with whom that individual has a close personal relationship if--
            ``(1) the individual who is the subject of the 
        information--
                    ``(A) has been notified of the individual's right 
                to object and has not objected to the disclosure;
                    ``(B) is not competent to be notified about the 
                right to object; or
                    ``(C) exigent circumstances exist such that it 
                would not be practicable to notify the individual of 
                the right to object; and
            ``(2) the information disclosed relates to health care 
        currently being provided to that individual.
    ``(b) Directory Information.--A health care provider and a person 
receiving protected health information under section 11823 may disclose 
protected health information to any person if--
            ``(1) the information does not reveal specific information 
        about the physical or mental condition of the individual who is 
        the subject of the information or health care provided to that 
        person;
            ``(2) the individual who is the subject of the 
        information--
                    ``(A) has been notified of the individual's right 
                to object and has not objected to the disclosure;
                    ``(B) is not competent to be notified about the 
                right to object; or
                    ``(C) exigent circumstances exist such that it 
                would not be practicable to notify the individual of 
                the right to object; and
            ``(3) the information consists only of 1 or more of the 
        following items:
                    ``(A) The name of the individual who is the subject 
                of the information.
                    ``(B) If the individual who is the subject of the 
                information is receiving health care from a health care 
                provider on a premises controlled by the provider--
                            ``(i) the location of the individual on the 
                        premises; and
                            ``(ii) the general health status of the 
                        individual, described as critical, poor, fair, 
                        stable, or satisfactory or in terms denoting 
                        similar conditions.
    ``(d) Identification of Deceased Individual.--A health care 
provider, health plan, employer, or life insurer, may disclose 
protected health information if necessary to assist in the 
identification of a deceased individual.

``SEC. 11823. EMERGENCY CIRCUMSTANCES.

    ``(a) In General.--A health care provider, health plan, employer, 
or person who receives protected health information under this section 
may disclose protected health information in emergency circumstances 
when necessary to protect the health or safety of an individual from 
imminent harm.
    ``(b) Scope of Disclosure.--The disclosure of protected health 
information under this section shall be limited to persons who need the 
information to take action to protect the health or safety of the 
individual.

  ``Subpart C--Disclosure for Oversight, Public Health, and Research 
                                Purposes

``SEC. 11831. OVERSIGHT.

    ``(a) In General.--A health information trustee may disclose 
protected health information to a health oversight agency for an 
oversight function authorized by law.
    ``(b) Use in Action Against Individuals.--Notwithstanding section 
11811(e), protected health information about an individual that is 
disclosed under this section may be used in, or disclosed to any person 
for use in, any administrative, civil, or criminal action or 
investigation directed against the individual who is the subject of the 
information if the action or investigation arises out of and is 
directly related to receipt of health care or payment for health care 
or an action involving a fraudulent claim related to health.

``SEC. 11832. PUBLIC HEALTH.

    ``A health care provider, health plan, public health authority, 
employer, or person who receives protected health information under 
section 11823 may disclose protected health information to a public 
health authority or other person authorized by law for use in a legally 
authorized--
            ``(1) disease or injury reporting;
            ``(2) public health surveillance; or
            ``(3) public health investigation or intervention.

``SEC. 11833. HEALTH RESEARCH.

    ``(a) In General.--A health information trustee may disclose 
protected health information to a health researcher if an institutional 
review board determines that the research project engaged in by the 
health researcher--
            ``(1) requires use of the protected health information for 
        the effectiveness of the project; and
            ``(2) is of sufficient importance to outweigh the intrusion 
        into the privacy of the individual who is the subject of the 
        information that would result from the disclosure.
    ``(b) Research Requiring Direct Contact.--A health information 
trustee may disclose protected health information to a health 
researcher for a research project that includes direct contact with an 
individual who is the subject of protected health information if an 
institutional review board determines that--
            ``(1) the research project meets the requirements of 
        paragraphs (1) and (2) of subsection (a);
            ``(2) direct contact is necessary to accomplish the 
        research purpose; and
            ``(3) the direct contact will be made in a manner that 
        minimizes the risk of harm, embarrassment, or other adverse 
        consequences to the individual.
    ``(c) Use of Health Information Network.--
            ``(1) In general.--A health information trustee may 
        disclose protected health information to a health researcher 
        using the health information network (as defined in section 
        11702) only if an institutional review board certified by the 
        Secretary under paragraph (2) determines that the research 
        project engaged in by the health researcher meets the 
        requirements of this section.
            ``(2) Certification of institutional review boards.--
                    ``(A) Regulations.--The Secretary, after notice and 
                opportunity for public comment, shall issue regulations 
                establishing certification requirements for 
                institutional review boards under this subtitle. Such 
                regulations shall be based on regulations issued under 
                section 491(a) of the Public Health Service Act and 
                shall ensure that institutional review boards certified 
                under this paragraph have the qualifications to access 
                and protect the confidentiality of research subjects.
                    ``(B) Certification.--The Secretary shall certify 
                an institutional review board that meets the 
                certification requirements established by the Secretary 
                under subparagraph (A).
    ``(d) Obligations of Recipient.--A person who receives protected 
health information pursuant to subsection (a)--
            ``(1) shall remove or destroy, at the earliest opportunity 
        consistent with the purposes of the project, information that 
        would enable an individual to be identified, unless--
                    ``(A) an institutional review board has determined 
                that there is a health or research justification for 
                retention of such identifiers; and
                    ``(B) there is an adequate plan to protect the 
                identifiers from disclosure that is inconsistent with 
                this section; and
            ``(2) shall use protected health information solely for 
        purposes of the health research project for which disclosure 
        was authorized under this section.

     ``Subpart D--Disclosure For Judicial, Administrative, and Law 
                          Enforcement Purposes

``SEC. 11841. JUDICIAL AND ADMINISTRATIVE PURPOSES.

    A health care provider, health plan, health oversight agency, or 
employer may disclose protected health information--
            ``(1) pursuant to the Federal Rules of Civil Procedure, the 
        Federal Rules of Criminal Procedure, or comparable rules of 
        other courts or administrative agencies in connection with 
        litigation or proceedings to which the individual who is the 
        subject of the information is a party and in which the 
        individual has placed the individual's physical or mental 
        condition in issue;
            ``(2) to a court, and to others ordered by a court, if the 
        protected health information is developed in response to a 
        court-ordered physical or mental examination; or
            ``(3) pursuant to a law requiring the reporting of specific 
        medical information to law enforcement authorities.

``SEC. 11842. LAW ENFORCEMENT.

    ``(a) In General.--A health care provider, health plan, health 
oversight agency, employer, or person who receives protected health 
information under section 11823 may disclose protected health 
information to a law enforcement agency (other than a health oversight 
agency governed by section 11831) if the information is requested for 
use--
            ``(1) in an investigation or prosecution of a health 
        information trustee;
            ``(2) in the identification of a victim or witness in a law 
        enforcement inquiry; or
            ``(3) in connection with the investigation of criminal 
        activity committed against the trustee or on premises 
        controlled by the trustee.
    ``(b) Certification.--When a law enforcement agency (other than a 
health oversight agency) requests that a health information trustee 
disclose protected health information under this section, the law 
enforcement agency shall provide the trustee with a written 
certification that--
            ``(1) specifies the information requested;
            ``(2) states that the information is needed for a lawful 
        purpose under this section; and
            ``(3) is signed by a supervisory official of a rank 
        designated by the head of the agency.
  ``(c) Restrictions on Additional Disclosure.--Notwithstanding section 
11811(e), protected health information about an individual that is 
disclosed to a law enforcement agency under this section may be used 
in, or disclosed for, an administrative, civil, or criminal action or 
investigation against the individual if the action or investigation 
arises out of and is directly related to the action or investigation 
for which the information was obtained.

   ``Subpart E--Disclosure Pursuant to Government Subpoena or Warrant

``SEC. 11851. GOVERNMENT SUBPOENAS AND WARRANTS.

    ``(a) In General.--A health care provider, health plan, health 
oversight agency, employer, or person who receives protected health 
information under section 11823 may disclose protected health 
information under this section if the disclosure is pursuant to--
            ``(1) a subpoena issued under the authority of a grand 
        jury, and the trustee is provided a written certification by 
        the grand jury seeking the information that the grand jury has 
        complied with the applicable access provisions of section 
        11852;
            ``(2) an administrative subpoena or a judicial subpoena or 
        warrant, and the trustee is provided a written certification by 
        the person seeking the information that the person has complied 
        with the applicable access provisions of section 11852; or
            ``(3) an administrative subpoena or a judicial subpoena or 
        warrant, and the disclosure otherwise meets the conditions of 
        section 11831, 11832, 11841, or 11842.
    ``(b) Restrictions on Additional Disclosure.--
            ``(1) Actions or investigations.--Notwithstanding section 
        11811(c), protected health information about an individual that 
        is received under subsection (a) may be disclosed for, or used 
        in, any administrative, civil, or criminal action or 
        investigation against the individual if the action or 
        investigation arises out of and is directly related to the 
        inquiry for which the information was obtained.
            ``(2) Special rule.--Protected health information about an 
        individual that is received under subsection (a)(3) may not be 
        disclosed by the recipient unless the recipient complies with 
        the conditions and restrictions on disclosure with which the 
        recipient would have been required to comply if the disclosure 
        had been made under section 11831, 11832, 11841, or 11842.

``SEC. 11852. ACCESS PROCEDURES FOR LAW ENFORCEMENT SUBPOENAS AND 
              WARRANTS.

    ``(a) Probable Cause Requirement.--A government authority may not 
obtain protected health information about an individual under paragraph 
(1) or (2) of section 11851(a) for use in a law enforcement inquiry 
unless there is probable cause to believe that the information is 
relevant to a legitimate law enforcement inquiry being conducted by the 
government authority.
    ``(b) Warrants.--A government authority that obtains protected 
health information about an individual under circumstances described in 
subsection (a) and pursuant to a warrant shall, not later than 30 days 
after the date the warrant was executed, serve the individual with, or 
mail to the last known address of the individual, a notice that 
protected health information about the individual was so obtained, 
together with a notice of the individual's right to challenge the 
warrant in accordance with section 11853.
    ``(c) Subpoenas.--Except as provided in subsection (d), a 
government authority may not obtain protected health information about 
an individual under circumstances described in subsection (a) and 
pursuant to a subpoena unless a copy of the subpoena has been served on 
the individual on or before the date of return of the subpoena, 
together with a notice of the individual's right to challenge the 
subpoena in accordance with section 11853, and--
            ``(1) 15 days have passed since the date of service on the 
        individual and within that time period the individual has not 
        initiated a challenge in accordance with section 11853; or
            ``(2) disclosure is ordered by a court after challenge 
        under section 11853.
    ``(d) Application for Delay.--
            ``(1) In general.--A government authority may apply ex 
        parte and under seal to an appropriate court to delay (for an 
        initial period of not longer than 90 days) serving a notice or 
        copy of a subpoena required under subsection (b) or (c) with 
        respect to a law enforcement inquiry. The government authority 
        may apply to the court for extensions of the delay.
            ``(2) Reasons for delay.--An application for a delay, or 
        extension of a delay, under this subsection shall state, with 
        reasonable specificity, the reasons why the delay or extension 
        is being sought.
            ``(3) Ex parte order.--The court shall enter an ex parte 
        order delaying or extending the delay of notice, an order 
        prohibiting the disclosure of the request for, or disclosure 
        of, the protected health information, and an order requiring 
        the disclosure of the protected health information if the court 
        finds that--
                    ``(A) the inquiry being conducted is within the 
                lawful jurisdiction of the government authority seeking 
                the protected health information;
                    ``(B) there is probable cause to believe that the 
                protected health information being sought is relevant 
                to a legitimate law enforcement inquiry;
                    ``(C) the government authority's need for the 
                information outweighs the privacy interest of the 
                individual who is the subject of the information; and
                    ``(D) there is reasonable ground to believe that 
                receipt of notice by the individual will result in--
                            ``(i) endangering the life or physical 
                        safety of any individual;
                            ``(ii) flight from prosecution;
                            ``(iii) destruction of or tampering with 
                        evidence or the information being sought; or
                            ``(iv) intimidation of potential witnesses.

``SEC. 11853. CHALLENGE PROCEDURES FOR LAW ENFORCEMENT WARRANTS AND 
              SUBPOENAS.

    ``(a) Motion To Quash.--Within 15 days after the date of service of 
a notice of execution or a copy of a subpoena of a government authority 
seeking protected health information about an individual under 
paragraph (1) or (2) of section 11851(a), the individual may file a 
motion to quash--
            ``(1) in the case of a State judicial warrant or subpoena, 
        in the court which issued the warrant or subpoena;
            ``(2) in the case of a warrant or subpoena issued under the 
        authority of a State that is not a State judicial warrant or 
        subpoena, in a court of competent jurisdiction; or
            ``(3) in the case of any other warrant or subpoena issued 
        under the authority of a Federal court or the United States, in 
        the United States district court for the district in which the 
        individual resides or in which the warrant or subpoena was 
        issued.
    ``(b) Copy.--A copy of the motion shall be served by the individual 
upon the government authority by registered or certified mail.
    ``(c) Proceedings.--The government authority may file with the 
court such papers, including affidavits and other sworn documents, as 
sustain the validity of the warrant or subpoena. The individual may 
file with the court reply papers in response to the government 
authority's filing. The court, upon the request of the individual or 
the government authority or both, may proceed in camera. The court may 
conduct such proceedings as it deems appropriate to rule on the motion, 
but shall endeavor to expedite its determination.
    ``(d) Standard for Decision.--A court may deny a motion under 
subsection (a) if it finds there is probable cause to believe the 
protected health information is relevant to a legitimate law 
enforcement inquiry being conducted by the government authority, unless 
the court finds the individual's privacy interest outweighs the 
government authority's need for the information. The individual shall 
have the burden of demonstrating that the individual's privacy interest 
outweighs the need by the government authority for the information.
    ``(e) Specific Considerations With Respect to Privacy Interest.--In 
reaching its determination, the court shall consider--
            ``(1) the particular purpose for which the information was 
        collected;
            ``(2) the degree to which disclosure of the information 
        will embarrass, injure, or invade the privacy of the 
        individual;
            ``(3) the effect of the disclosure on the individual's 
        future health care;
            ``(4) the importance of the inquiry being conducted by the 
        government authority, and the importance of the information to 
        that inquiry; and
            ``(5) any other factor deemed relevant by the court.
    ``(f) Attorney's Fees.--In the case of a motion brought under 
subsection (a) in which the individual has substantially prevailed, the 
court may assess against the government authority a reasonable 
attorney's fee and other litigation costs (including expert's fees) 
reasonably incurred.
    ``(g) No Interlocutory Appeal.--A ruling denying a motion to quash 
under this section shall not be deemed to be a final order, and no 
interlocutory appeal may be taken therefrom by the individual. An 
appeal of such a ruling may be taken by the individual within such 
period of time as is provided by law as part of any appeal from a final 
order in any legal proceeding initiated against the individual arising 
out of or based upon the protected health information disclosed.

       ``Subpart F--Disclosure Pursuant to Private Party Subpoena

``SEC. 11854. PRIVATE PARTY SUBPOENAS.

    ``A health care provider, health plan, employer, or person who 
receives protected health information under section 11823 may disclose 
protected health information under this section if the disclosure is 
pursuant to a subpoena issued on behalf of a private party who has 
complied with the access provisions of section 11855.

``SEC. 11855. ACCESS PROCEDURES FOR PRIVATE PARTY SUBPOENAS.

    ``A private party may not obtain protected health information about 
an individual pursuant to a subpoena unless a copy of the subpoena 
together with a notice of the individual's right to challenge the 
subpoena in accordance with section 11856 has been served upon the 
individual on or before the date of return of the subpoena, and--
            ``(1) 15 days have passed since the date of service on the 
        individual, and within that time period the individual has not 
        initiated a challenge in accordance with section 11856; or
            ``(2) disclosure is ordered by a court under section 11856.

``SEC. 11856. CHALLENGE PROCEDURES FOR PRIVATE PARTY SUBPOENAS.

    ``(a) Motion To Quash Subpoena.--Within 15 days after service of a 
copy of the subpoena seeking protected health information under section 
11854, the individual who is the subject of the protected health 
information may file in any court of competent jurisdiction a motion to 
quash the subpoena and serve a copy of the motion on the person seeking 
the information.
    ``(b) Standard for Decision.--The court shall grant a motion under 
subsection (a) unless the respondent demonstrates that--
            ``(1) there is reasonable ground to believe the information 
        is relevant to a lawsuit or other judicial or administrative 
        proceeding; and
            ``(2) the need of the respondent for the information 
        outweighs the privacy interest of the individual.
    ``(c) Specific Considerations With Respect to Privacy Interest.--In 
determining under subsection (b) whether the need of the respondent for 
the information outweighs the privacy interest of the individual, the 
court shall consider--
            ``(1) the particular purpose for which the information was 
        collected;
            ``(2) the degree to which disclosure of the information 
        would embarrass, injure, or invade the privacy of the 
        individual;
            ``(3) the effect of the disclosure on the individual's 
        future health care;
            ``(4) the importance of the information to the lawsuit or 
        proceeding; and
            ``(5) any other relevant factor.
    ``(d) Attorney's Fees.--In the case of a motion brought under 
subsection (a) in which the individual has substantially prevailed, the 
court may assess against the respondent a reasonable attorney's fee and 
other litigation costs and expenses (including expert's fees) 
reasonably incurred.

   ``PART III--PROCEDURES FOR ENSURING SECURITY OF PROTECTED HEALTH 
                              INFORMATION

                ``Subpart A--Establishment of Safeguards

``SEC. 11861. ESTABLISHMENT OF SAFEGUARDS.

    ``(a) In General.--A health information trustee shall establish and 
maintain appropriate administrative, technical, and physical 
safeguards--
            ``(1) to ensure the integrity and confidentiality of 
        protected health information created or received by the 
        trustee; and
            ``(2) to protect against any anticipated threats or hazards 
        to the security or integrity of such information.
    ``(b) Regulations.--The Secretary shall promulgate regulations 
regarding security measures for protected health information.

``SEC. 11862. ACCOUNTING FOR DISCLOSURES.

    ``(a) In General.--
            ``(1) Requirement to create or maintain record.--A health 
        information trustee shall create and maintain, with respect to 
        any protected health information disclosed in exceptional 
        circumstances (as described in paragraph (2)), a record of--
                    ``(A) the date and purpose of the disclosure;
                    ``(B) the name of the person to whom or to which 
                the disclosure was made;
                    ``(C) the address of the person to whom or to which 
                the disclosure was made or the location to which the 
                disclosure was made; and
                    ``(D) the information disclosed, if the recording 
                of the information disclosed is practicable, taking 
                into account the technical capabilities of the system 
                used to maintain the record and the costs of such 
                maintenance.
            ``(2) Exceptional circumstances described.--For purposes of 
        paragraph (1) protected health information is disclosed in 
        exceptional circumstances if the disclosure--
                    ``(A) is not a routine part of doing business, as 
                determined in accordance with guidelines promulgated by 
                the Secretary; or
                    ``(B) is permitted under sections 11823 and 11832.
    ``(b) Disclosure record part of information.--A record created and 
maintained under paragraph (a) shall be maintained as part of the 
protected health information to which the record pertains.

``Subpart B--Review of Protected Health Information By Subjects of the 
                              Information

``SEC. 11871. INSPECTION OF PROTECTED HEALTH INFORMATION.

    ``(a) In General.--Except as provided in subsection (c), a health 
care provider or health plan--
            ``(1) shall permit an individual who is the subject of 
        protected health information to inspect any such information 
        that the provider or plan maintains;
            ``(2) shall permit the individual to have a copy of the 
        information;
            ``(3) shall permit a person who has been designated in 
        writing by the individual who is the subject of the information 
        to inspect, or to have a copy of, the information on behalf of 
        the individual or to accompany the individual during the 
        inspection; and
            ``(4) may offer to explain or interpret information that is 
        inspected or copied under this subsection.
    ``(b) Additional Requests.--Except as provided in subsection (c), a 
health plan or health care provider shall, upon written request of an 
individual--
            ``(1) determine the identity of previous providers to the 
        individual; and
            ``(2) obtain protected health information regarding the 
        individual.
    ``(c) Exceptions.--A health care provider or health plan is not 
required by this section to permit inspection or copying of protected 
health information if any of the following conditions apply:
            ``(1) Mental health treatment notes.--The information 
        consists of psychiatric, psychological, or mental health 
        treatment notes, and the provider or plan determines, based on 
        reasonable medical judgment, that inspection or copying of the 
        notes would cause sufficient harm to the individual who is the 
        subject of the notes so as to outweigh the desirability of 
        permitting access, and the provider or plan has not disclosed 
        the notes to any person not directly engaged in treating the 
        individual, except with the authorization of the individual or 
        under compulsion of law.
            ``(2) Information about others.--The information relates to 
        an individual other than the individual seeking to inspect or 
        have a copy of the information and the provider or plan 
        determines, based on reasonable medical judgment, that 
        inspection or copying of the information would cause sufficient 
        harm to 1 or both of the individuals so as to outweigh the 
        desirability of permitting access.
            ``(3) Endangerment to life or safety.--The provider or plan 
        determines that disclosure of the information could reasonably 
        be expected to endanger the life or physical safety of any 
        individual.
            ``(4) Confidential source.--The information identifies or 
        could reasonably lead to the identification of a person (other 
        than a health care provider) who provided information under a 
        promise of confidentiality to a health care provider concerning 
        the individual who is the subject of the information.
            ``(5) Administrative purposes.--The information--
                    ``(A) is used by the provider or plan solely for 
                administrative purposes and not in the provision of 
                health care to the individual who is the subject of the 
                information; and
                    ``(B) has not been disclosed by the provider or 
                plan to any other person.
    ``(d) Inspection and Copying of Segregable Portion.--A health care 
provider or health plan shall permit inspection and copying under 
subsection (a) of any reasonably segregable portion of a record after 
deletion of any portion that is exempt under subsection (c).
    ``(e) Conditions.--A health care provider or health plan may 
require a written request for the inspection and copying of protected 
health information under this subsection. The health care provider or 
health plan may require a cost reimbursement for such inspection and 
copying.
    ``(f) Statement of reasons for denial.--If a health care provider 
or health plan denies a request for inspection or copying under this 
section, the provider or plan shall provide the individual who made the 
request (or the individual's designated representative) with a written 
statement of the reasons for the denial.
    ``(g) Deadline.--A health care provider or health plan shall comply 
with or deny a request for inspection or copying of protected health 
information under this section within the 30-day period beginning on 
the date on which the provider or plan receives the request.

``SEC. 11872. AMENDMENT OF PROTECTED HEALTH INFORMATION.

    ``(a) In General.--A health care provider or health plan shall, 
within the 45-day period beginning on the date on which the provider or 
plan receives from an individual a written request that the provider or 
plan correct or amend the information--
            ``(1) make the correction or amendment requested;
            ``(2) inform the individual of the correction or amendment 
        that has been made; and
            ``(3) inform any person who is identified by the 
        individual, who is not an officer, employee or agent of the 
        provider or plan, and to whom the uncorrected or unamended 
        portion of the information was previously disclosed, of the 
        correction or amendment that has been made.
    ``(b) Refusal to Correct.--If the provider or plan refuses to make 
the corrections, the provider or plan shall inform the individual of--
            ``(1) the reasons for the refusal of the provider or plan 
        to make the correction or amendment;
            ``(2) any procedures for further review of the refusal; and
            ``(3) the individual's right to file with the provider or 
        plan a concise statement setting forth the requested correction 
        or amendment and the individual's reasons for disagreeing with 
        the refusal of the provider or plan.
    ``(c) Bases for Request To Correct or Amend.--An individual may 
request correction or amendment of protected health information about 
the individual under paragraph (a) if the information is not timely, 
accurate, relevant to the system of records, or complete.
    ``(d) Statement of Disagreement.--After an individual has filed a 
statement of disagreement under paragraph (b)(3), the provider or plan, 
in any subsequent disclosure of the disputed portion of the 
information--
            ``(1) shall include a copy of the individual's statement; 
        and
            ``(2) may include a concise statement of the reasons of the 
        provider or plan for not making the requested correction or 
        amendment.
    ``(e) Rule of Construction.--This section shall not be construed to 
require a health care provider or health plan to conduct a formal, 
informal, or other hearing or proceeding concerning a request for a 
correction or amendment to protected health information the provider or 
plan maintains.
    ``(f) Correction.--For purposes of paragraph (a), a correction is 
deemed to have been made to protected health information when 
information that is not timely, accurate, relevant to the system of 
records, or complete is clearly marked as incorrect or when 
supplementary correct information is made part of the information.

``SEC. 11873. NOTICE OF INFORMATION PRACTICES.

    ``(a) Preparation of Written Notice.--A health care provider or 
health plan shall prepare a written notice of information practices 
describing the following:
            ``(1) Personal rights of an individual.--The rights under 
        this subpart of an individual who is the subject of protected 
        health information, including the right to inspect and copy 
        such information and the right to seek amendments to such 
        information, and the procedures for authorizing disclosures of 
        protected health information and for revoking such 
        authorizations.
            ``(2) Procedures of provider or plan.--The procedures 
        established by the provider or plan for the exercise of the 
        rights of individuals about whom protected health information 
        is maintained.
            ``(3) Authorized disclosures.--The disclosures of protected 
        health information that are authorized.
    ``(b) Dissemination of Notice.--A health care provider or health 
plan--
            ``(1) shall, upon request, provide any individual with a 
        copy of the notice of information practices described in 
        subsection (a); and
            ``(2) shall make reasonable efforts to inform individuals 
        in a clear and conspicuous manner of the existence and 
        availability of the notice.
    ``(c) Model Notice.--The Secretary, after notice and opportunity 
for public comment, shall develop and disseminate a model notice of 
information practices for use by health care providers and health plans 
under this section.

           ``Subpart C--Standards for Electronic Disclosures

``SEC. 11882. STANDARDS FOR ELECTRONIC DISCLOSURES.

    ``The Secretary shall promulgate standards for disclosing protected 
health information in accordance with this subtitle in electronic form. 
Such standards shall include standards relating to the creation, 
transmission, receipt, and maintenance, of any written document 
required or authorized under this subtitle.

                          ``PART IV--SANCTIONS

           ``Subpart A--No Sanctions for Permissible Actions

``SEC. 11891. NO LIABILITY FOR PERMISSIBLE DISCLOSURES.

    ``A health information trustee who makes a disclosure of protected 
health information about an individual that is permitted by this 
subtitle shall not be liable to the individual for the disclosure under 
common law.

``SEC. 11892. NO LIABILITY FOR INSTITUTIONAL REVIEW BOARD 
              DETERMINATIONS.

    ``If the members of an institutional review board make a 
determination in good faith that--
            ``(1) a health research project is of sufficient importance 
        to outweigh the intrusion into the privacy of an individual; 
        and
            ``(2) the effectiveness of the project requires use of 
        protected health information,
the members, the board, and the parent institution of the board shall 
not be liable to the individual as a result of the determination.

``SEC. 11893. RELIANCE ON CERTIFIED ENTITY.

    ``If a health information trustee contracts with a certified health 
information network service to make a disclosure of any protected 
health information on behalf of such trustee in accordance with this 
subtitle and such service makes a disclosure of such information that 
is in violation of this subtitle, the trustee shall not be liable for 
to the individual who is the subject of the information for such 
unlawful disclosure.

                      ``Subpart B--Civil Sanctions

``SEC. 11901. CIVIL PENALTY.

    ``(a) Violation.--Any health information trustee who the Secretary 
determines has substantially failed to comply with this subtitle shall 
be subject, in addition to any other penalties that may be prescribed 
by law, to a civil penalty of not more than $10,000 for each such 
violation.
    ``(b) Procedures for Imposition of Penalties.--Section 1128A, other 
than subsections (a) and (b) and the second sentence of subsection (f) 
of that section, shall apply to the imposition of a civil monetary 
penalty under this section in the same manner as such provisions apply 
with respect to the imposition of a penalty under section 1128A.

``SEC. 11902. CIVIL ACTION.

    ``(a) In General.--An individual who is aggrieved by conduct in 
violation of this subtitle may bring a civil action to recover--
            ``(1) the greater of actual damages or liquidated damages 
        of $5,000;
            ``(2) punitive damages;
            ``(3) a reasonable attorney's fee and expenses of 
        litigation;
            ``(4) costs of litigation; and
            ``(5) such preliminary and equitable relief as the court 
        determines to be appropriate.
    ``(b) Limitation.--No action may be commenced under this section 
more than 3 years after the date on which the violation was or should 
reasonably have been discovered.

                    ``Subpart C--Criminal Sanctions

``SEC. 11911. WRONGFUL DISCLOSURE OF PROTECTED HEALTH INFORMATION.

    ``(a) Offense.--A person who knowingly--
            ``(1) obtains protected health information relating to an 
        individual in violation of this subtitle; or
            ``(2) discloses protected health information to another 
        person in violation of this subtitle,
shall be punished as provided in subsection (b).
    ``(b) Penalties.--A person described in subsection (a) shall--
            ``(1) be fined not more than $50,000, imprisoned not more 
        than 1 year, or both;
            ``(2) if the offense is committed under false pretenses, be 
        fined not more than $100,000, imprisoned not more than 5 years, 
        or both; and
            ``(3) if the offense is committed with intent to sell, 
        transfer, or use protected health information for commercial 
        advantage, personal gain, or malicious harm, fined not more 
        than $250,000, imprisoned not more than 10 years, or both.

                  ``PART V--ADMINISTRATIVE PROVISIONS

``SEC. 11921. RELATIONSHIP TO OTHER LAWS.

    ``(a) State Law.--Except as provided in subsections (b), (c), and 
(d), this subtitle preempts State law.
    ``(b) Laws Relating to Public or Mental Health.--Nothing in this 
subtitle shall be construed to preempt or operate to the exclusion of 
any State law relating to public health or mental health that prevents 
or regulates disclosure of protected health information otherwise 
allowed under this subtitle.
    ``(c) Privileges.--Nothing in this subtitle is intended to preempt 
or modify State common or statutory law to the extent such law concerns 
a privilege of a witness or person in a court of the State. This 
subtitle does not supersede or modify Federal common or statutory law 
to the extent such law concerns a privilege of a witness or person in a 
court of the United States. Authorizations pursuant to section 11812 
shall not be construed as a waiver of any such privilege.
    ``(d) Certain Duties Under State or Federal Law.--This subtitle 
shall not be construed to preempt, supersede, or modify the operation 
of--
            ``(1) any law that provides for the reporting of vital 
        statistics such as birth or death information;
            ``(2) any law requiring the reporting of abuse or neglect 
        information about any individual;
            ``(3) subpart II of part E of title XXVI of the Public 
        Health Service Act (relating to notifications of emergency 
        response employees of possible exposure to infectious 
        diseases); or
            ``(4) any Federal law or regulation governing 
        confidentiality of alcohol and drug patient records.

``SEC. 11922. RIGHTS OF INCOMPETENTS.

    ``(a) Effect of Declaration of Incompetence.--Except as provided in 
section 11923, if an individual has been declared to be incompetent by 
a court of competent jurisdiction, the rights of the individual under 
this subtitle shall be exercised and discharged in the best interests 
of the individual through the individual's representative.
    ``(b) No Court Declaration.--Except as provided in section 11923, 
if a health care provider determines that an individual, who has not 
been declared to be incompetent by a court of competent jurisdiction, 
suffers from a medical condition that prevents the individual from 
acting knowingly or effectively on the individual's own behalf, the 
right of the individual to authorize disclosure may be exercised and 
discharged in the best interest of the individual by the individual's 
representative.

``SEC. 11923. EXERCISE OF RIGHTS.

    ``(a) Individuals Who Are 18 or Legally Capable.--In the case of an 
individual--
            ``(1) who is 18 years of age or older, all rights of the 
        individual shall be exercised by the individual; or
            ``(2) who, acting alone, has the legal right, as determined 
        by State law, to apply for and obtain a type of medical 
        examination, care, or treatment and who has sought such 
        examination, care, or treatment, the individual shall exercise 
        all rights of an individual under this subtitle with respect to 
        protected health information relating to such examination, 
        care, or treatment.
    ``(b) Individuals Under 18.--Except as provided in subsection 
(a)(2), in the case of an individual who is--
            ``(1) under 14 years of age, all the individual's rights 
        under this subtitle shall be exercised through the parent or 
        legal guardian of the individual; or
            ``(2) 14, 15, 16, or 17 years of age, the rights of 
        inspection and amendment, and the right to authorize disclosure 
        of protected health information of the individual may be 
        exercised either by the individual or by the parent or legal 
        guardian of the individual.''.
    (b) Conforming Amendment.--Title XI of the Social Security Act (42 
U.S.C. 1301 et seq.), as amended by section 401, is amended by striking 
the title and inserting the following:

      ``TITLE XI--GENERAL PROVISIONS, PEER REVIEW, ADMINISTRATIVE 
                     SIMPLIFICATION, AND PRIVACY''

                     TITLE V--MALPRACTICE AND FRAUD

                    Subtitle A--Federal Tort Reform

SEC. 501. FEDERAL TORT REFORM.

    (a) In General.--Part A of subtitle A of title XI of the Social 
Security Act (42 U.S.C. 1301 et seq.), as amended by section 401, is 
amended by inserting after section 1128B the following new section:

``SEC. 1129. FEDERAL TORT REFORM.

    ``(a) Applicability.--
            ``(1) In general.--Except as provided in paragraph (3), 
        this section shall apply with respect to any medical 
        malpractice claim or medical malpractice liability action 
        brought in any Federal or State court, except that this section 
        shall not apply to a claim or action for damages arising from a 
        vaccine-related injury or death to the extent that title XXI of 
        the Public Health Service Act applies to the claim or action.
            ``(2) Preemption.--The provisions of this section shall 
        preempt any State law to the extent such law is inconsistent 
        with the limitations contained in such provisions. The 
        provisions of this section shall not preempt any State law that 
        provides for defenses in addition to those contained in this 
        section, places greater limitations on the amount of attorneys' 
        fees that can be collected, or otherwise imposes greater 
        restrictions on non-economic or punitive damages than those 
        provided in this section.
            ``(3) Effect on sovereign immunity and choice of law or 
        venue.--Nothing in this section shall be construed to--
                    ``(A) waive or affect any defense of sovereign 
                immunity asserted by any State under any provision of 
                law;
                    ``(B) waive or affect any defense of sovereign 
                immunity asserted by the United States;
                    ``(C) affect the applicability of any provision of 
                the Foreign Sovereign Immunities Act of 1976;
                    ``(D) preempt State choice-of-law rules with 
                respect to claims brought by a foreign nation or a 
                citizen of a foreign nation; or
                    ``(E) affect the right of any court to transfer 
                venue or to apply the law of a foreign nation or to 
                dismiss a claim of a foreign nation or of a citizen of 
                a foreign nation on the ground of inconvenient forum.
            ``(4) Federal court jurisdiction not established on federal 
        question grounds.--Nothing in this section shall be construed 
        to establish any jurisdiction in the district courts of the 
        United States over medical malpractice liability actions on the 
        basis of section 1331 or 1337 of title 28, United States Code.
    ``(b) Definitions.--In this section, the following definitions 
apply:
            ``(1) Alternative dispute resolution system; adr.--The term 
        `alternative dispute resolution system' or `ADR' means a system 
        that provides for the resolution of medical malpractice claims 
        in a manner other than through medical malpractice liability 
        actions.
            ``(2) Claimant.--The term `claimant' means any person who 
        alleges a medical malpractice claim, and any person on whose 
        behalf such a claim is alleged, including the decedent in the 
        case of an action brought through or on behalf of an estate.
            ``(3) Health care professional.--The term `health care 
        professional' means any individual who provides health care 
        services in a State and who is required by the laws or 
        regulations of the State to be licensed or certified by the 
        State to provide such services in the State.
            ``(4) Health care provider.--The term `health care 
        provider' means any organization or institution that is engaged 
        in the delivery of health care services in a State and that is 
        required by the laws or regulations of the State to be licensed 
        or certified by the State to engage in the delivery of such 
        services in the State.
            ``(5) Injury.--The term `injury' means any illness, 
        disease, or other harm that is the subject of a medical 
        malpractice liability action or a medical malpractice claim.
            ``(6) Medical malpractice liability action.--The term 
        `medical malpractice liability action' means a civil action 
        brought in a State or Federal court against a health care 
        provider or health care professional (regardless of the theory 
        of liability on which the claim is based) in which the 
        plaintiff alleges a medical malpractice claim.
            ``(7) Medical malpractice claim.--
                    ``(A) In general.--The term `medical malpractice 
                claim' means a claim brought against a health care 
                provider or health care professional in which a 
                claimant alleges that injury was caused by the 
                provision of (or the failure to provide) health care 
                services, including health care services provided under 
                a health care plan described in subparagraph (B), 
                except that such term does not include--
                            ``(i) any claim based on an allegation of 
                        an intentional tort; or
                            ``(ii) any claim based on an allegation 
                        that a product is defective that is brought 
                        against any individual or entity that is not a 
                        health care professional or health care 
                        provider.
                    ``(B) Health care plan described.--A health care 
                plan described in this subparagraph includes--
                            ``(i) a certified standard or nonstandard 
                        health plan;
                            ``(ii) a certified supplemental health 
                        benefits plan;
                            ``(iii) a certified long-term care policy;
                            ``(iv) a State health care program (as 
                        defined in section 1128(h)); and
                            ``(v) the medicare program under title 
                        XVIII.
            ``(8) Participating state.--The term `participating State' 
        means a participating State under title XXI.
    ``(c) Alternative Dispute Resolution.--
            ``(1) ADR in participating states.--Each participating 
        State shall--
                    ``(A) establish an alternative dispute resolution 
                system for the determination of medical malpractice 
                claims (including the tolling of any applicable statute 
                of limitations during any action under such system); 
                and
                    ``(B) require that State health care programs and 
                certified standard and nonstandard health plans 
                disclose to enrollees (and potential enrollees), in 
                accordance with standards established by the 
                Secretary--
                            ``(i) the availability of procedures for 
                        consumer grievances under the program or plan;
                            ``(ii) the alternative dispute resolution 
                        method or methods adopted by the State under 
                        this subsection for its alternative dispute 
                        resolution system and the procedures for filing 
                        actions under such system;
                            ``(iii) the consequences of, and 
                        alternatives to, participation in such system.
            ``(2) Application to medical malpractice claims.--In the 
        case of any medical malpractice claim, no medical malpractice 
        liability action may be brought with respect to such claim in a 
        participating State until the final resolution of the claim 
        under the alternative dispute resolution system established by 
        the State under paragraph (1).
            ``(3) Adoption of mechanism by participating states.--Each 
        participating State shall adopt at least one of the methods of 
        alternative dispute resolution specified under paragraph (4) or 
        (5) for the resolution of medical malpractice claims.
            ``(4) Specification of permissible adr methods.--
                    ``(A) In general.--The Secretary shall, by 
                regulation, develop alternative dispute resolution 
                methods for use by participating States in resolving 
                medical malpractice claims under paragraph (1). Such 
                methods shall include at least the following:
                            ``(i) Binding arbitration.--The use of 
                        binding arbitration.
                            ``(ii) Fault-based systems.--The use of 
                        fault-based administrative systems, expedited 
                        review, and dismissal of claims when not 
                        adequately supported.
                            ``(iii) Early offers of settlement.--The 
                        use of a process under which parties have the 
                        option to make early offers of settlement.
                            ``(iv) Catastrophic systems.--The use of 
                        catastrophic injury compensation systems.
                    ``(B) Standards for establishing methods.--In 
                developing alternative dispute resolution methods under 
                subparagraph (A), the Secretary shall assure that the 
                methods promote the resolution of medical malpractice 
                claims in a manner that--
                            ``(i) is affordable for the parties 
                        involved;
                            ``(ii) provides for timely resolution of 
                        claims;
                            ``(iii) provides for the consistent and 
                        fair resolution of claims; and
                            ``(iv) provides for reasonably convenient 
                        access to the alternative dispute resolution 
                        system for individuals enrolled in certified 
                        standard and nonstandard health plans.
            ``(5) State initiated alternative.--A participating State 
        will be permitted to operate a method of alternative dispute 
        resolution (other than a method described in paragraph (4)) 
        that otherwise complies with this section if such system--
                    ``(A) is determined by the Secretary to accomplish 
                the purposes and otherwise meet the requirements of 
                this section; and
                    ``(B) is certified by the Secretary as an 
                appropriate alternative dispute resolution method.
    ``(d) Procedures for Filing Actions.--
            ``(1) Contesting of adr decision.--If either party to a 
        decision issued with respect to an alternative dispute 
        resolution method applied under subsection (c) is dissatisfied 
        with such decision, such party may (to the extent otherwise 
        permitted by State law) contest such decision after it is 
        issued and seek a rehearing of the medical malpractice claim 
        involved in a court of competent jurisdiction.
            ``(2) Notice of intent to contest decision.--Not later than 
        60 days after a decision is issued with respect to a medical 
        malpractice claim under an alternative dispute resolution 
        system established by a participating State under subsection 
        (c), each party affected by the decision shall submit a sealed 
        statement to a court of competent jurisdiction indicating 
        whether or not the party intends to contest the decision.
            ``(3) Court of competent jurisdiction.--For purposes of 
        this subsection, the term `court of competent jurisdiction' 
        means--
                    ``(A) with respect to actions filed in a State 
                court, the appropriate State trial court; and
                    ``(B) with respect to actions filed in a Federal 
                court, the appropriate United States district court.
            ``(4) Legal effect of uncontested alternative dispute 
        resolution system decision.--The decision reached under an 
        alternative dispute resolution system shall, for purposes of 
        enforcement by a court of competent jurisdiction, have the same 
        status in the court as the verdict of a medical malpractice 
        liability action adjudicated in a State or Federal trial court. 
        The previous sentence shall not apply to a decision that is 
        contested by a party affected by the decision pursuant to 
        paragraph (1).
    ``(e) Treatment of Attorneys' Fees and Other Costs.--
            ``(1) Limitation on amount of contingency fees.--
                    ``(A) In general.--An attorney who represents, on a 
                contingency fee basis, a claimant in a medical 
                malpractice claim or medical malpractice liability 
                action may not charge, demand, receive, or collect for 
                services rendered in connection with such claim or 
                action in excess of the following amount recovered by 
                judgment or settlement under such claim or action:
                            ``(i) 33\1/3\ percent of the first $150,000 
                        (or portion thereof) recovered, based on after-
                        tax recovery, plus
                            ``(ii) 25 percent of any amount in excess 
                        of $150,000 recovered, based on after-tax 
                        recovery.
                    ``(B) Calculation of periodic payments.--In the 
                event that a judgment or settlement includes periodic 
                or future payments of damages, the amount recovered for 
                purposes of computing the limitation on the contingency 
                fee under subparagraph (A) shall be based on the cost 
                of the annuity or trust established to make the 
                payments. In any case in which an annuity or trust is 
                not established to make such payments, such amount 
                shall be based on the present value of the payments.
            ``(2) Requiring party contesting adr ruling to pay 
        attorneys' fees and other costs.--
                    ``(A) In general.--The court in a medical 
                malpractice liability action shall require a party that 
                (pursuant to subsection (d)(1)) contests the ruling of 
                the alternative dispute resolution system of a 
                participating State with respect to the medical 
                malpractice claim that is the subject of the action to 
                pay to the opposing party the costs incurred by the 
                opposing party under the action, including attorneys' 
                fees, fees paid to expert witnesses, and other 
                litigation expenses (but not including court costs, 
                filing fees, or other expenses paid directly by the 
                party to the court, or any fees or costs associated 
                with the resolution of the claim under the alternative 
                dispute resolution system), but only if--
                            ``(i) in the case of an action in which the 
                        party that contested the ruling is the 
                        claimant, the amount of damages awarded to the 
                        party under the action is less than 66\2/3\ 
                        percent of the amount of damages awarded to the 
                        party under the alternative dispute resolution 
                        system; and
                            ``(ii) in the case of an action in which 
                        the party that contested the ruling is the 
                        defendant, the amount of damages assessed 
                        against the party under the action is greater 
                        than the amount of damages assessed under the 
                        alternative dispute resolution system.
                    ``(B) Exception.--Subparagraph (A) shall not apply 
                if the court finds that the application of such 
                subparagraph to a party would constitute an undue 
                hardship, and issues an order waiving or modifying the 
                application of such subparagraph that specifies the 
                grounds for the court's decision.
                    ``(C) Limit on attorneys' fees paid.--Attorneys' 
                fees that are required to be paid under subparagraph 
                (A) by the contesting party shall not exceed the amount 
                of the attorneys' fees incurred by the contesting party 
                in the action. If the attorneys' fees of the contesting 
                party are based on a contingency fee agreement, the 
                amount of attorneys' fees for purposes of the preceding 
                sentence shall not exceed the reasonable value of those 
                services.
            ``(3) Contingency fee defined.--As used in this subsection, 
        the term `contingency fee' means any fee for professional legal 
        services which is, in whole or in part, contingent upon the 
        recovery of any amount of damages, whether through judgment or 
        settlement.
    ``(f) Scope of Liability.--
            ``(1) In general.--With respect to punitive and noneconomic 
        damages, the liability of each defendant in a medical 
        malpractice claim or medical malpractice liability action shall 
        be several only and may not be joint. Such a defendant shall be 
        liable only for the amount of punitive or noneconomic damages 
        allocated to the defendant in direct proportion to such 
        defendant's percentage of fault or responsibility for the 
        injury suffered by the claimant.
            ``(2) Determination of percentage of liability.--The trier 
        of fact in a medical malpractice claim or medical malpractice 
        liability action shall determine the extent of each defendant's 
        fault or responsibility for injury suffered by the claimant, 
        and shall assign a percentage of responsibility for such injury 
        to each such defendant.
    ``(g) Reform of Damages.--
            ``(1) Limitation on noneconomic damages.--
                    ``(A) In general.--With respect to a medical 
                malpractice claim or medical malpractice liability 
                action brought in any forum, the total amount of 
                damages that may be awarded to an individual and the 
                family members of such individual for noneconomic 
                losses resulting from an injury alleged under such 
                claim or action may not exceed the amount determined 
                under subparagraph (B), regardless of the number of 
                health care professionals, health care providers, and 
                other defendants against whom the action is brought or 
                the number of actions brought with respect to the 
                injury. With respect to actions heard by a jury, the 
                jury may not be informed of the limitation contained in 
                this paragraph. If the jury's damage award exceeds such 
                limitation, a reduction in such award shall be made by 
                the court.
                    ``(B) Limitation amount.--The amount determined 
                under this subparagraph shall be equal to--
                            ``(i) in 1995, $250,000; and
                            ``(ii) in subsequent years, the amount 
                        determined under this subparagraph in the 
                        previous year, updated by the estimated 
                        percentage change in the Consumer Price Index 
                        for All Urban Consumers (United States city 
                        average) during the previous calendar year, 
                        adjusted by any previous over estimations or 
                        under estimations under this subparagraph.
            ``(2) Punitive damages.--
                    ``(A) Fund.--Each participating State shall 
                establish a health care safety and policy program, to 
                be approved by the Secretary, and a fund consisting of 
                such amounts as are transferred to the fund under 
                subparagraph (B).
                    ``(B) Transfer of amounts.--Each participating 
                State shall require that 75 percent of all awards of 
                punitive damages resulting from all medical malpractice 
                claims or medical malpractice liability actions in that 
                State be transferred to the fund established under 
                subparagraph (A) in the State.
                    ``(C) Obligations from fund.--The chief executive 
                officer of a participating State shall obligate such 
                sums as are available in the fund established in that 
                State under subparagraph (A) to--
                            ``(i) license and certify health care 
                        professionals in the State;
                            ``(ii) implement health care quality 
                        assurance programs;
                            ``(iii) carry out public education programs 
                        to increase awareness of the availability of 
                        comparative value information on certified 
                        standard health plans distributed in accordance 
                        with the State consumer information program 
                        established under section 21025; and
                            ``(iv) carry out programs to reduce 
                        malpractice-related costs for health care 
                        providers volunteering to provide health care 
                        services in medically underserved areas.
    ``(h) No-Fault Liability Demonstration Projects.--
            ``(1) In general.--The Secretary may provide funds (in such 
        amount as the Secretary considers appropriate) to one or more 
        eligible participating States to establish no-fault medical 
        liability system demonstration projects to replace the common 
        law tort liability system for medical injuries.
            ``(2) Eligibility of state.--A participating State is 
        eligible to participate in the demonstration project 
        established under paragraph (1) if the State submits an 
        application to the Secretary at such time, in such manner, and 
        containing such information and assurances as the Secretary may 
        require.
            ``(3) Waivers.--The Secretary may waive any provision of 
        this section that the Secretary determines is necessary for a 
        State to conduct a demonstration project established under 
        paragraph (1).
            ``(4) Authorization of appropriations.--There are 
        authorized to be appropriated such sums as may be necessary to 
        carry out the demonstration projects under this subsection.''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to medical malpractice claims arising on or after January 1, 
1995.

  Subtitle B--Expanded Efforts To Control Health Care Fraud and Abuse 
                   Affecting Federal Outlay Programs

                      PART I--IMPROVED ENFORCEMENT

SEC. 511. HEALTH CARE FRAUD AND ABUSE AFFECTING FEDERAL OUTLAY 
              PROGRAMS.

    (a) In General.--Part A of subtitle A of title XI of the Social 
Security Act, as amended by section 501, is amended by inserting after 
section 1128B (42 U.S.C. 1320a-7b) the following new sections:

    ``health care fraud and abuse affecting federal outlay programs

    ``Sec. 1128C. (a) In General.--Not later than January 1, 1996, the 
Secretary and the Attorney General of the United States shall establish 
a joint program--
            ``(1) to coordinate Federal, State, and local law 
        enforcement programs to control fraud and abuse affecting 
        Federal outlay programs,
            ``(2) to prosecute health care matters (through criminal, 
        civil, and administrative proceedings);
            ``(3) to conduct investigations (including consumer 
        complaint investigations), audits, evaluations, and inspections 
        relating to the delivery of and payment for health care in the 
        United States,
            ``(4) to conduct financial and performance audits of health 
        care programs and operations;
            ``(5) to conduct inspections and other evaluations;
            ``(6) to provide rewards paid under section 1128F;
            ``(7) to facilitate the enforcement of sections 1128 
        through 1128G and other statutes applicable to health care 
        fraud and abuse.
            ``(8) to provide health care provider and consumer 
        education (including the provision of advisory opinions) 
        regarding compliance with the provisions of sections 1128 
        through 1128G.
Not more than 20 percent of the amounts available in the Federal Outlay 
Program Fraud and Abuse Control Account for any fiscal year shall be 
used for the purposes described in paragraph (8).
    ``(b) Coordination With Law Enforcement Agencies.--In carrying out 
the program under subsection (a), the Secretary and the Attorney 
General shall consult with, and arrange for the sharing of data and 
resources with, Federal, State, and local law enforcement agencies, 
State Medicaid Fraud Control Units, and State agencies responsible for 
the licensing and certification of health care providers.
    ``(c) Coordination With Purchasing Cooperatives and Certified 
Health Plans.--In carrying out the program under subsection (a), the 
Secretary and the Attorney General shall consult with, and arrange for 
the sharing of data with representatives of purchasing cooperatives and 
certified health plans.
    ``(d) Authorities of Attorney General and Secretary.--In carrying 
out duties under subsection (a), the Attorney General and the Secretary 
are authorized--
            ``(1) to conduct, supervise, and coordinate audits, civil 
        and criminal investigations, inspections, and evaluations 
        relating to the program established under such subsection;
            ``(2) to have access (including on-line access as requested 
        and available) to all records available to purchasing 
        cooperatives and certified health plans relating to the 
        activities described in paragraph (1) (subject to restrictions 
        based on the confidentiality of certain information under part 
        II of subtitle B of this title); and
            ``(3) to issue advisory opinions, fraud alerts, and other 
        appropriate educational material to assist in compliance with 
        the provisions of sections 1128 through 1128G.
    ``(e) Qualified Immunity for Providing Information.--The provisions 
of section 1157(a) (relating to limitation on liability) shall apply to 
a person providing information or communications to the Secretary or 
the Attorney General in conjunction with their performance of duties 
under this section, in the same manner as such section applies to 
information provided to organizations with a contract under part B of 
this subtitle.
    ``(f) Use of Powers Under Inspector General Act of 1978.--In 
carrying out duties and responsibilities under the program established 
under subsection (a), the Inspector General is authorized to exercise 
all powers granted under the Inspector General Act of 1978 to the same 
manner and extent as provided in that Act.
    ``(g) Definitions.--In this subtitle:
            ``(1) Certified health plans; purchasing cooperatives.--The 
        terms `certified health plan' and `purchasing cooperative' have 
        the meanings given such terms by sections 21011(a)(1) and 
        21100(14), respectively.
            ``(2) Federal outlay programs.--The term `Federal outlay 
        programs' means--
                    ``(A) any program under title XVIII, and
                    ``(B) any State health care program (as defined in 
                section 1128(h).
            ``(3) Inspector general.--The term `Inspector General' 
        means the Inspector General of the Department of Health and 
        Human Services.''.
    (b) State Health Care Program Defined.--Section 1128(h) of the 
Social Security Act (42 U.S.C. 1320a-7(h)) is amended by redesignating 
paragraphs (2) and (3) as paragraphs (3) and (4), respectively, and by 
inserting after paragraph (1) the following new paragraph:
            ``(2) any participating State program approved under title 
        XXI (including any program established by the Secretary of 
        Labor with respect to multistate self-insured health plans) and 
        any standard or nonstandard health plan, supplemental health 
        benefits plan, or long-term care policy certified under such 
        program,''.

SEC. 512. DEFINITION OF FEDERAL HEALTH CARE OFFENSE.

    Subtitle A of title XI of the Social Security Act, as amended by 
section 511, is amended by inserting after section 1128C the following 
new section:

                 ``federal health care offense defined

    ``Sec. 1128D. For purposes of this title, the term `Federal health 
care offense' means a violation of, or a criminal conspiracy to 
violate--
            ``(1) sections 226, 668, 1033, or 1347 of title 18, United 
        States Code;
            ``(2) section 1128B;
            ``(3) sections 287, 371, 664, 666, 1001, 1027, 1341, 1343, 
        or 1954 of title 18, United States Code, if the violation or 
        conspiracy relates to health care fraud;
            ``(4) sections 501 or 511 of the Employee Retirement Income 
        Security Act of 1974, if the violation or conspiracy relates to 
        health care fraud; or
            ``(5) sections 301, 303(a)(2), or 303 (b) or (e) of the 
        Federal Food Drug and Cosmetic Act, if the violation or 
        conspiracy relates to health care fraud.''.

SEC. 513. USE OF FUNDS BY INSPECTOR GENERAL.

    Subtitle A of title XI of the Social Security Act, as amended by 
section 512, is amended by inserting after section 1128D the following 
new section:

                  ``use of funds by inspector general

    ``Sec. 1128E. (a) Reimbursements for Investigations.--
            ``(1) In general.--The Inspector General is authorized to 
        receive and retain for current use reimbursement for the costs 
        of conducting investigations, when such restitution is ordered 
        by a court, voluntarily agreed to by the payer, or otherwise.
            ``(2) Crediting.--Funds received by the Inspector General 
        as reimbursement for costs of conducting investigations shall 
        be deposited to the credit of the appropriation from which 
        initially paid, or to appropriations for similar purposes 
        currently available at the time of deposit, and shall remain 
        available for obligation for 1 year from the date of their 
        deposit.
            ``(3) Exception for forfeitures.--This subsection does not 
        apply to investigative costs paid to the Inspector General from 
        the Department of Justice Asset Forfeiture Fund, which monies 
        shall be deposited and expended in accordance with subsection 
        (b).
    ``(b) HHS Office of Inspector General Asset Forfeiture Proceeds 
Fund.--
            ``(1) In general.--There is hereby established the `HHS 
        Office of Inspector General Asset Forfeiture Proceeds Fund,' to 
        be administered by the Inspector General, which shall be 
        available to the Inspector General without fiscal year 
        limitation for expenses relating to the investigation of 
        matters within the jurisdiction of the Inspector General.
            ``(2) Deposits.--There shall be deposited in the Fund all 
        proceeds from forfeitures that have been transferred to the 
        Inspector General from the Department of Justice Asset 
        Forfeiture Fund under section 524 of title 28, United States 
        Code.''.

SEC. 514. REWARDS FOR INFORMATION LEADING TO PROSECUTION AND 
              CONVICTION.

    Subtitle A of title XI of the Social Security Act, as amended by 
section 513, is amended by inserting after section 1128E the following 
new section:

    ``rewards for information leading to prosecution and conviction

    ``Sec. 1128F. (a) In General.--In special circumstances, the 
Secretary and the Attorney General of the United States may jointly 
make a payment of up to $10,000 to a person who furnishes information 
unknown to the Government relating to a possible prosecution of a 
Federal health care offense (as defined in section 1128D).
    ``(b) Ineligible Persons.--A person is not eligible for a payment 
under subsection (a) if--
            ``(1) the person is a current or former officer or employee 
        of a Federal or State government agency or instrumentality who 
        furnishes information discovered or gathered in the course of 
        government employment;
            ``(2) the person knowingly participated in the offense;
            ``(3) the information furnished by the person consists of 
        allegations or transactions that have been disclosed to the 
        public--
                    ``(A) in a criminal, civil, or administrative 
                proceeding;
                    ``(B) in a congressional, administrative, or 
                General Accounting Office report, hearing, audit, or 
                investigation; or
                    ``(C) by the news media, unless the person is the 
                original source of the information; or
            ``(4) when, in the judgment of the Attorney General, it 
        appears that a person whose illegal activities are being 
        prosecuted or investigated could benefit from the award.
    ``(c) Definition.--For the purposes of subsection (b)(3)(C), the 
term `original source' means a person who has direct and independent 
knowledge of the information that is furnished and has voluntarily 
provided the information to the Government prior to disclosure by the 
news media.
    ``(d) No Judicial Review.--Neither the failure of the Secretary and 
the Attorney General to authorize a payment under subsection (a) nor 
the amount authorized shall be subject to judicial review.''.

             PART II--CIVIL PENALTIES AND RIGHTS OF ACTION

SEC. 521. CIVIL MONETARY PENALTIES.

    (a) In General.--Section 1128A(a) of the Social Security Act (42 
U.S.C. 1320a-7a(a)) is amended by adding at the end the following new 
sentence: ``Any amounts recovered under this subsection with respect to 
a certified health plan (as defined in section 21011(a)) or certified 
long-term care policy (as defined in section 21013(a)(2)) shall be paid 
to the Secretary and such portions of the amounts recovered as is 
determined to have been improperly paid from a certified health plan or 
certified long-term care policy for the delivery of or payment for 
health care items or services shall be repaid to such plan or policy 
(and enrollees of such plan or policy as appropriate) and the remainder 
of the amounts recovered shall be deposited in the Federal Outlays 
Program Fraud and Abuse Control Account established under section 9551 
of the Internal Revenue Code of 1986.''.
    (b) Additional Offenses.--
            (1) In general.--Section 1128A(a) of the Social Security 
        Act (42 U.S.C. 1320a-7a(a)) is amended--
                    (A) by striking ``or'' at the end of paragraphs (1) 
                and (2);
                    (B) by striking the comma at the end of paragraph 
                (2) and inserting a semicolon; and
                    (C) by inserting after paragraph (3) the following 
                new paragraphs:
            ``(4) offers, pays, or transfers remuneration to any 
        individual eligible for benefits under title XVIII of this Act, 
        or under a State health care program (as defined in section 
        1128(h)), that such person knows or should know is likely to 
        influence such individual to order or receive from a particular 
        provider, practitioner, or supplier any item or service for 
        which payment may be made, in whole or in part, under title 
        XVIII, or a State health care program;
            ``(5) in the case of a person who is not an organization, 
        agency, or other entity, who is excluded from participating in 
        a program under title XVIII or a State health care program in 
        accordance with this section, section 1128, or section 1156 and 
        who, during the period of exclusion, retains either a direct or 
        indirect ownership or control interest of 5 percent or more in, 
        or an ownership or control interest (as defined in section 
        1124(a)(3)) in, or who is an officer, director, agent, or 
        managing employee (as defined in section 1126(b)) of, an entity 
        that is participating in a program under title XVIII or a State 
        health care program;
            ``(6) engages in a practice that circumvents a payment 
        methodology intended to reimburse for two or more discreet 
        medical items or services at a single or fixed amount, 
        including but not limited to, multiple admissions or 
        readmission to hospitals and other institutions reimbursed on a 
        diagnosis reimbursement grouping basis;
            ``(7) engages in a practice which has the effect of 
        limiting or discouraging (as compared to other plan enrollees) 
        the utilization of health care services covered by law or under 
        the service contract by title XIX or other publicly subsidized 
        patients, including but not limited to differential standards 
        for the location and hours of service offered by providers 
        participating in the plan;
            ``(8) substantially fails to cooperate with a quality 
        assurance program or a utilization review activity;
            ``(9) fails substantially to provide or authorize medically 
        necessary items and services that are required to be provided 
        to an individual covered under a certified health plan (as 
        defined in section 21011(a)) or public program for the delivery 
        of or payment for health care items or services, if the failure 
        has adversely affected (or had a substantial likelihood of 
        adversely affecting) the individual;
            ``(10) employs or contracts with any individual or entity 
        who is excluded from participating in a program under title 
        XVIII or a State health care program in accordance with this 
        section, section 1128, or section 1156, for the provision of 
        any services (including but not limited to health care, 
        utilization review, medical social work, or administrative), or 
        employs or contracts with any entity for the direct or indirect 
        provision of such services, through such an excluded individual 
        or entity; or
            ``(11) submits false or fraudulent statements, data or 
        information, or claims to the Secretary, the Secretary of 
        Labor, any other Federal agency, a State health care agency, a 
        purchasing cooperative (under subtitle D of title XXI), or any 
        other Federal, State or local agency charged with 
        implementation or oversight of a certifed health plan under 
        this Act or a public program that the person knows or should 
        know is fraudulent;''.
            (2) Remuneration defined.--Section 1128A(i) of such Act (42 
        U.S.C. 1320a-7a(i)) is amended by adding at the end the 
        following new paragraph:
            ``(6) The term `remuneration' includes the waiver of 
        coinsurance and deductible amounts (or any part thereof), and 
        transfers of items or services for free or for other than fair 
        market value, except that such term does not include the waiver 
        of coinsurance or deductible amounts by a person or entity, 
        if--
                    ``(A) the waiver is not offered as part of any 
                advertisement or solicitation;
                    ``(B) the person does not routinely waive 
                coinsurance or deductible amounts; and
                    ``(C) the person--
                            ``(i) waives the coinsurance and deductible 
                        amounts after determining in good faith that 
                        the individual is indigent;
                            ``(ii) fails to collect coinsurance or 
                        deductible amounts after making reasonable 
                        collection efforts; or
                            ``(iii) provides for any permissible waiver 
                        as specified in section 1128B(b)(3) or in 
                        regulations issued by the Secretary.''.
            (3) Claim for item or service based on incorrect coding or 
        medically unnecessary services.--Section 1128A(a)(1) of such 
        Act (42 U.S.C. 1320a-7a(a)(1)) is amended--
                    (A) in subparagraph (A), by striking ``claimed,'' 
                and inserting the following: ``claimed, including any 
                person who presents or causes to be presented a claim 
                for an item or service which includes a procedure or 
                diagnosis code that the person knows or should know 
                will result in a greater payment to the person than the 
                code applicable to the item or service actually 
                provided or actual patient medical condition,'';
                    (B) in subparagraph (C), by striking ``or'' at the 
                end;
                    (C) in subparagraph (D), by striking ``; or'' and 
                inserting ``, or''; and
                    (D) by inserting after subparagraph (D) the 
                following new subparagraph:
                    ``(E) is for a medical or other item or service 
                that a person knows or should know is not medically 
                necessary or appropriate; or''.
    (c) Penalties Increased.--
            (1) General rule.--Section 1128A(a) of the Social Security 
        Act (42 U.S.C. 1320a-7a(a)) is amended--
                    (A) by striking ``$2,000'' and inserting 
                ``$10,000''; and
                    (B) by striking ``twice the amount claimed'' and 
                inserting ``3 times the amount claimed''.
            (2) Interest on penalties.--Section 1128A(f) of such Act 
        (42 U.S.C. 1320a-7a(f)) is amended by adding after the first 
        sentence the following: ``Interest shall accrue on the 
        penalties and assessments imposed by a final determination of 
        the Secretary in accordance with an annual rate established by 
        the Secretary under the Federal Claims Collection Act. The rate 
        of interest charged shall be the rate in effect on the date the 
        determination becomes final and shall remain fixed at that rate 
        until the entire amount due is paid. In addition, the Secretary 
        is authorized to recover the costs of collection in any case 
        where such penalties and assessments are not paid within 30 
        days after the determination becomes final, or in the case of a 
        compromised amount, where payments are more than 90 days past 
        due. In lieu of actual costs, the Secretary is authorized to 
        impose a charge of up to 10 percent of the amount of such 
        penalties and assessments owed to cover the costs of 
        collection.''.
    (d) Authority of Secretary of Labor to Impose Penalties, 
Assessments, and Exclusions.--Section 1128A of the Social Security Act 
(42 U.S.C. 1320a-7a) is amended by adding at the end the following new 
subsection:
    ``(m)(1) The Secretary of Labor may initiate an action to impose a 
civil monetary penalty, assessment, or exclusion under this section 
with respect to actions relating to a certified multistate self-insured 
health plan (as defined on section 21051(b)) pursuant to regulations 
promulgated by the Secretary of Health and Human Services, in 
consultation with the Attorney General.
    ``(2) Under the regulations promulgated under paragraph (1), the 
Attorney General and the Secretary shall review an action proposed by 
the Secretary of Labor, and not later than 60 days after receiving 
notice of the proposed action from the Secretary of Labor, shall--
            ``(A) approve the proposed action to be taken by the 
        Secretary of Labor;
            ``(B) disapprove the proposed action; or
            ``(C) assume responsibility for initiating a criminal, 
        civil, or administrative action based on the information 
        provided in the notice.
    ``(3) If the Attorney General and the Secretary fail to respond to 
a proposed action by the Secretary of Labor within the period described 
in paragraph (2), the Attorney General and the Secretary shall be 
deemed to have approved the proposed action to be taken by the 
Secretary of Labor.''.
    (e) Notification of Licensing Authorities.--Section 1128A of the 
Social Security Act (42 U.S.C. 1320a-7a), as amended by subsection (d), 
is amended by adding at the end the following new subsection:
    ``(n) Whenever the Secretary's determination to impose a penalty, 
assessment, or exclusion under this section becomes final, the 
Secretary shall notify the appropriate State or local licensing agency 
or organization (including the agency specified in section 1864(a) and 
1902(a)(33)) that such a penalty, assessment, or exclusion has become 
final and the reasons therefor.''.

SEC. 522. PERMITTING PARTIES TO BRING ACTIONS ON OWN BEHALF.

    Subtitle A of title XI of the Social Security Act, as amended by 
section 514, is amended by inserting after section 1128F the following 
new section:

                       ``private rights of action

    ``Sec. 1128G. (a) In General.--Subject to subsections (b) and (c), 
a certified health plan (as defined in section 21011(b)) or experience-
rated employer (as defined in section 21004(d)(4)) that suffers harm or 
monetary loss exceeding the sum or value of $10,000 (excluding 
interest) as a result of any activity of an individual or entity which 
makes the individual or entity subject to a civil monetary penalty 
under section 1128A may, in a civil action against the individual or 
entity in the United States District Court, obtain treble damages and 
costs including attorneys' fees against the individual or entity and 
such equitable relief as is appropriate.
    ``(b) Requirements for Bringing Action.--A person may bring a civil 
action under this section only if--
            ``(1) the person provides the Secretary with written notice 
        of--
                    ``(A) the person's intent to bring an action under 
                this section,
                    ``(B) the identities of the individuals or entities 
                the person intends to name as defendants to the action, 
                and
                    ``(C) all information the person possesses 
                regarding the activity that is the subject of the 
                action that may materially affect the Secretary's 
                decision to initiate a proceeding to impose a civil 
                monetary penalty under section 1128A against the 
                defendants, and
            ``(2) one of the following conditions is met:
                    ``(A) During the 60-day period that begins on the 
                date the Secretary receives the written notice 
                described in paragraph (1), the Secretary does not 
                notify the person that the Secretary intends to 
                initiate an investigation to determine whether to 
                impose a civil monetary penalty under section 1128A 
                against the defendants.
                    ``(B) The Secretary notifies the person during the 
                60-day period described in subparagraph (A) that the 
                Secretary intends to initiate an investigation to 
                determine whether to impose a civil monetary penalty 
                under such section against the defendants, and the 
                Secretary subsequently notifies the person that the 
                Secretary no longer intends to initiate an 
                investigation or proceeding to impose a civil monetary 
                penalty against the defendants.
                    ``(C) After the expiration of the 1-year period 
                that begins on the date written notice is provided to 
                the Secretary, the Secretary has not initiated a 
                proceeding to impose a civil monetary penalty against 
                the defendants.
    ``(c) Treatment of Excess Awards.--If a person is awarded any 
amounts in an action brought under this section that are in excess of 
the damages suffered by the person as a result of the defendant's 
activities, 20 percent of such amounts shall be withheld from the 
person for payment into the Federal Outlays Program Fraud and Abuse 
Control Account established under section 1128C(a).
    ``(d) Statute of Limitations.--No action may be brought under this 
section more than 6 years after the date of the activity with respect 
to which the action is brought.
    ``(e) No Limitation on Other Actions.--Nothing in this section 
shall limit the right of any person to pursue any other right of action 
or remedy available under the law.
    ``(f) Pendant Jurisdiction.--Nothing in this section shall be 
construed, by reason of a claim arising under this section, to confer 
on the Courts of the United States jurisdiction over any State law 
claim.''.

SEC. 523. EXCLUSION FROM PROGRAM PARTICIPATION.

    (a) Mandatory Exclusion.--Section 1128(a) of the Social Security 
Act (42 U.S.C. 1320a-7) is amended--
            (1) by inserting ``(1)'' before ``The'';
            (2) by redesignating paragraphs (1) and (2) as 
        subparagraphs (A) and (B), respectively; and
            (3) by adding at the end the following:
            ``(C) Conviction of criminal offense.--Any individual or 
        entity that has been convicted after the date of the enactment 
        of this subparagraph, under Federal or State law, in connection 
        with the delivery of a health care item or service of a 
        criminal offense consisting of a felony relating to fraud, 
        theft, embezzlement, breach of fiduciary responsibility, or 
        other financial misconduct.
            ``(D) Conviction relating to controlled substance.--Any 
        individual or entity has been convicted after such date, under 
        Federal or State law, of a criminal offense consisting of a 
        felony relating to the unlawful manufacture, distribution, 
        prescription, or dispensing of a controlled substance.
    ``(2) Waiver permitted.--
            ``(A) In general.--When, in the opinion of the Secretary, 
        mandatory exclusion under paragraph (1) of an individual or 
        entity would significantly harm the public health or pose a 
        significant risk to the public health, the Secretary may waive 
        such exclusion and shall apply such other appropriate penalties 
        as authorized under this subtitle.
            ``(B) Application for waiver of exclusion.--
                    ``(i) In general.--An individual or entity subject 
                to mandatory exclusion under this subsection may apply 
                to the Secretary, in a manner specified by the 
                Secretary in regulations, for waiver of the exclusion.
                    ``(ii) Secretarial response.--The Secretary may 
                waive the exclusion for the reasons described in 
                subparagraph (A).''.
    (b) Permissive Exclusion.--Section 1128(b) of the Social Security 
Act (42 U.S.C. 1320a-7) is amended--
            (1) in paragraph (1), by inserting ``consisting of a 
        misdemeanor'' after ``offense''; and
            (2) in paragraph (3), by inserting ``consisting of a 
        misdemeanor'' after ``offense''.
    (c) Period of Exclusion.--
            (1) Minimum period for mandatory exclusions.--Section 
        1128(c)(3)(B) of the Social Security Act (42 U.S.C. 1320a-
        7(c)(3)(B)) is amended by striking ``five years'' and inserting 
        ``two years''.
            (2) Minimum period for certain permissive exclusions.--
        Section 1128(c)(3) of such Act (42 U.S.C. 1320a-7(c)(3)) is 
        amended by adding the following new subparagraph:
    ``(D)(i) In the case of an exclusion of an individual excluded from 
participation in a public program under, or is otherwise described in, 
paragraph (1), (2), or (3) of subsection (b), the period of exclusion 
shall be a minimum of 1 year, unless the Secretary determines that a 
longer period is necessary because of aggravating circumstances.
    ``(ii) In the case of an exclusion of an individual or entity 
excluded from participation in a public program under, or is otherwise 
described in, paragraph (4), (5)(A), or (5)(B) of subsection (b), the 
period of the exclusion shall not be less than the period during which 
the individual's or entity's license to provide health care is revoked, 
suspended or surrendered, or the individual or the entity is excluded 
or suspended from a Federal or State health care program.
    ``(iii) In the case of an exclusion of an individual or entity 
described in paragraph (6)(B) of subsection (b), the period of the 
exclusion shall be not less than 1 year.''.
    (d) Notice to Entities Administering Public Programs for the 
Delivery of or Payment for Health Care Items or Services.--Section 
1128(d) of the Social Security Act (42 U.S.C. 1320a-7(d)) is amended--
            (1) in paragraph (1), by inserting ``and all certified 
        health plans certified under such program for the delivery of 
        or payment for health care items or services'' after 
        ``participate'';
            (2) in paragraph (2), by inserting ``and each sponsor of a 
        certified health plan'' after ``program''.
    (e) Expanded Opportunity for Administrative Hearings.--Section 
1128(f)(2) of the Social Security Act (42 U.S.C. 1320a-7(f)(2)) is 
amended by striking ``subsection (b)(7)'' and inserting ``paragraphs 
(6)(B), (7), (8), (9), (11), (12), or (14) of subsection (b)''.
    (f) Notification of Termination of Exclusion.--Section 1128(g)(3)) 
of the Social Security Act (42 U.S.C. 1320a-7(g)(3)) is amended by 
inserting ``and each sponsor of a certified health plan'' after 
``program''.
    (g) Request for Exclusion.--Section 1128(d) of the Social Security 
Act (42 U.S.C. 1320a-7(d)) is amended by adding at the end the 
following new paragraph:
    ``(4)(A) The sponsor of any certified health plan, the board of any 
purchasing cooperative, and the Secretary of Labor in the case of a 
multistate self-insured health plan may request that the Secretary of 
Health and Human Services exclude an individual or entity with respect 
to actions under a certified health plan in accordance with this 
section.
    ``(B) Notwithstanding any other provision of this title and title 
XXI, no payment may be made under a certified health plan for the 
delivery of or payment for any item or service (other than an emergency 
item or service, not including items or services furnished in an 
emergency room of a hospital) furnished--
            ``(i) by an individual or entity during the period when 
        such individual or entity is excluded pursuant to this section 
        from participation in a certified health plan; or
            ``(ii) at the medical direction or on the prescription of a 
        physician during the period when the physician is excluded 
        pursuant to this section from participation in a certified 
        health plan and the person furnishing the item or service knew 
        or had reason to know of the exclusion (after a reasonable time 
        period after reasonable notice has been furnished to the 
        person).''.

                  PART III--AMENDMENTS TO CRIMINAL LAW

SEC. 531. HEALTH CARE FRAUD.

    (a) In General.--Chapter 63 of title 18, United States Code, is 
amended by adding at the end the following:
``Sec. 1347. Health care fraud
    ``(a) Whoever knowingly executes, or attempts to execute, a scheme 
or artifice--
            ``(1) to defraud any purchasing cooperative, certified 
        health plan, certified long-term care policy, or other person, 
        in connection with the delivery of or payment for health care 
        benefits, items, or services; or
            ``(2) to obtain, by means of false or fraudulent pretenses, 
        representations, or promises, any of the money or property 
        owned by, or under the custody or control of, any purchasing 
        cooperative, certified health plan, certified long-term care 
        policy, or person in connection with the delivery of or payment 
        for health care benefits, items, or services;
shall be fined under this title or imprisoned not more than 10 years, 
or both. If the violation results in serious bodily injury (as defined 
in section 1365 of this title) such person shall be imprisoned for any 
term of years.
    ``(b) As used in this section--
            ``(1) the terms `purchasing cooperative', `certified health 
        plan', and `certified long-term care policy' have the meanings 
        given those terms in sections 21100(14), 21011(a)(1), and 
        21011(b)(2) of the Social Security Act, respectively.''.
    (b) Clerical Amendment.--The table of sections at the beginning of 
chapter 63 of title 18, United States Code, is amended by adding at the 
end the following:

``1347. Health care fraud.''.

SEC. 532. THEFT OR EMBEZZLEMENT.

    (a) In General.--Chapter 31 of title 18, United States Code, is 
amended by adding at the end the following:
``Sec. 668. Theft or embezzlement in connection with health care
    ``(a) Whoever embezzles, steals, willfully and unlawfully converts 
to the use of any person other than the rightful owner, or 
intentionally misapplies any of the moneys, securities, premiums, 
credits, property, or other assets of a purchasing cooperative, 
certified health plan, certified long-term care policy, or of any fund 
connected with such a cooperative, plan, or policy, shall be fined 
under this title or imprisoned not more than 10 years, or both.
    ``(b) As used in this section, the terms `purchasing cooperative', 
`certified health plan', and `certified long-term care policy' have the 
meanings given those terms in sections 21100(14), 21011(a)(1), and 
21011(b)(2) of the Social Security Act, respectively.''.
    (b) Clerical Amendment.--The table of sections at the beginning of 
chapter 31 of title 18, United States Code, is amended by adding at the 
end the following:

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

SEC. 533. FALSE STATEMENTS.

    (a) In General.--Chapter 47 of title 18, United States Code, is 
amended by adding at the end the following:
``Sec. 1033. False statements relating to health care matters
    ``(a) Whoever, in any matter involving a purchasing cooperative, 
certified health plan, or certified long-term care policy, knowingly 
and willfully falsifies, conceals, or covers up by any trick, scheme, 
or device a material fact, or makes any false, fictitious, or 
fraudulent statements or representations, or makes or uses any false 
writing or document knowing the same to contain any false, fictitious, 
or fraudulent statement or entry, shall be fined under this title or 
imprisoned not more than 5 years, or both.
    ``(b) As used in this section, the terms `purchasing cooperative', 
`certified health plan', and `certified long-term care policy' have the 
meanings given those terms in sections 21100(14), 21011(a)(1), and 
21011(b)(2) of the Social Security Act, respectively.''.
    (b) Clerical Amendment.--The table of sections at the beginning of 
chapter 47 of title 18, United States Code, is amended by adding at the 
end the following:

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

SEC. 534. BRIBERY AND GRAFT.

    (a) In General.--Chapter 11 of title 18, United States Code, is 
amended by adding at the end the following:
``Sec. 226. Bribery and graft in connection with health care
    ``(a) Whoever--
            ``(1) directly or indirectly, corruptly gives, offers, or 
        promises anything of value to a health care official, or offers 
        or promises a health care official to give anything of value to 
        any other person, with intent--
                    ``(A) to influence any of the health care 
                official's actions, decisions, or duties relating to a 
                purchasing cooperative, certified health plan, or 
                certified long-term care policy;
                    ``(B) to influence such an official to commit or 
                aid in the committing, or collude in or allow, any 
                fraud, or make opportunity for the commission of any 
                fraud, on a purchasing cooperative, certified health 
                plan, or certified long-term care policy; or
                    ``(C) to induce such an official to engage in any 
                conduct in violation of the lawful duty of such 
                official; or
            ``(2) being a health care official, directly or indirectly, 
        corruptly demands, seeks, receives, accepts, or agrees to 
        accept anything of value personally or for any other person or 
        entity, the giving of which violates paragraph (1) of this 
        subsection;
shall be fined under this title or imprisoned not more than 15 years, 
or both.
    ``(b) Whoever, otherwise than as provided by law for the proper 
discharge of any duty, directly or indirectly gives, offers, or 
promises anything of value to a health care official, for or because of 
any of the health care official's actions, decisions, or duties 
relating to a purchasing cooperative, certified health plan, or 
certified long-term care policy, shall be fined under this title or 
imprisoned not more than two years, or both.
    ``(c) As used in this section--
            ``(1) the term `health care official' means--
                    ``(A) an administrator, officer, trustee, 
                fiduciary, custodian, counsel, agent, or employee of 
                any purchasing cooperative, certified health plan, or 
                certified long-term care policy;
                    ``(B) an officer, counsel, agent, or employee, of 
                an organization that provides services under contract 
                to any purchasing cooperative, certified health plan, 
                or certified long-term care policy;
                    ``(C) an official or employee of a State agency 
                having regulatory authority over any purchasing 
                cooperative, certified health plan, or certified long-
                term care policy;
                    ``(D) an officer, counsel, agent, or employee of a 
                health care sponsor;
            ``(2) the term `health care sponsor' means any individual 
        or entity serving as the sponsor of a certified health plan for 
        purposes of title XXI of the Social Security Act, and includes 
        the joint board of trustees or other similar body used by two 
        or more employers to administer a certified health plan for 
        purposes of such Act; and
            ``(3) the terms `purchasing cooperative', `certified health 
        plan', and `certified long-term care policy' have the meanings 
        given those terms in sections 21100(14), 21011(a)(1), and 
        21011(b)(2) of the Social Security Act, respectively.''.
    (b) Clerical Amendment.--The table of chapters at the beginning of 
chapter 11 of title 18, United States Code, is amended by adding at the 
end the following:

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

SEC. 535. INJUNCTIVE RELIEF RELATING TO HEALTH CARE OFFENSES.

    Section 1345(a)(1) of title 18, United States Code, is amended--
            (1) by striking ``or'' at the end of subparagraph (A);
            (2) by inserting ``or'' at the end of subparagraph (B); and
            (3) by adding at the end the following:
            ``(C) committing or about to commit a Federal health care 
        offense (as defined in section 1128D of the Social Security 
        Act);''.

SEC. 536. GRAND JURY DISCLOSURE.

    Section 3322 of title 18, United States Code, is amended--
            (1) by redesignating subsections (c) and (d) as subsections 
        (d) and (e), respectively; and
            (2) by inserting after subsection (b) the following:
    ``(c) A person who is privy to grand jury information concerning a 
health law violation--
            ``(1) received in the course of duty as an attorney for the 
        Government; or
            ``(2) disclosed under rule 6(e)(3)(A)(ii) of the Federal 
        Rules of Criminal Procedure;
may disclose that information to an attorney for the Government to use 
in any civil proceeding related to a Federal health care offense (as 
defined in section 1128D of the Social Security Act).''.

SEC. 537. FORFEITURES FOR VIOLATIONS OF FRAUD STATUTES.

    Section 982(a) of title 18, United States Code, is amended by 
inserting after paragraph (5) the following:
    ``(6) The court, in imposing sentence on a person convicted of a 
Federal health care offense (as defined in section 1128D of the Social 
Security Act) that results in serious bodily injury (as defined in 
section 1365 of this title), shall order such person to forfeit to the 
United States any property, real or personal, constituting or traceable 
to the gross proceeds obtained, directly or indirectly, as a result of 
the commission of the offense.''.

             PART IV--AMENDMENTS TO CIVIL FALSE CLAIMS ACT

SEC. 541. AMENDMENTS TO CIVIL FALSE CLAIMS ACT.

    Section 3729 of title 31, United States Code, is amended--
            (1) in subsection (a)(7), by inserting ``or to a certified 
        health plan or certified long-term care policy'' after 
        ``property to the Government'';
            (2) in the matter following subsection (a)(7), by inserting 
        ``or certified health plan or certified long-term care policy'' 
        before ``sustains because of the act of that person,'';
            (3) at the end of the first sentence of subsection (a), by 
        inserting ``or certified health plan or certified long-term 
        care policy'' before ``sustains because of the act of the 
        person.'';
            (4) in subsection (c)--
                    (A) by inserting ``the term'' after ``section,''; 
                and
                    (B) by adding at the end the following: ``The term 
                also includes any request or demand, whether under 
                contract of otherwise, for money or property which is 
                made or presented to a certified health plan or 
                certified long-term care policy.''; and
            (5) by adding at the end the following:
    ``(f) Certified Health Plan and Certified Long-Term Care Policy 
Defined.--For purposes of this section, the terms `purchasing 
cooperative', `certified health plan', and `certified long-term care 
policy' have the meanings given those terms in sections 21100(14), 
21011(a)(1), and 21011(b)(2) of the Social Security Act, 
respectively.''.

                         PART V--EFFECTIVE DATE

SEC. 551. EFFECTIVE DATE.

    Except as otherwise provided in this subtitle, the provisions of, 
and amendments made by, this subtitle shall be effective on and after 
January 1, 1996.

          TITLE VI--MEDICARE, MEDICAL EDUCATION, AND MEDICAID

SEC. 600. REFERENCES TO SOCIAL SECURITY ACT.

    Except as otherwise specifically provided, whenever in this title 
an amendment is expressed in terms of an amendment to or repeal of a 
section or other provision, the reference shall be considered to be 
made to that section or other provision of the Social Security Act.

                          Subtitle A--Medicare

                   PART I--RISK CONTRACTING ENTITIES

SEC. 601. IMPROVEMENTS OF RISK CONTRACTS.

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

          ``payments to certain certified standard heath plans

    ``Sec. 1876. (a) In General.--
            ``(1) General permission to contract.--
                    ``(A) Risk contracts.--The Secretary may enter into 
                a risk contract with any certified standard health plan 
                (as defined in paragraph (4)(A)) in a service area (as 
                defined in paragraph (4)(B)) if--
                            ``(i) the plan has at least 5,000 enrollees 
                        (except that the Secretary may enter into such 
                        a contract with a certified standard health 
                        plan that has fewer enrollees if the plan 
                        primarily serves members residing outside of 
                        urbanized areas); and
                            ``(ii) the plan--
                                    ``(I) meets the requirements of 
                                this section with respect to 
                                individuals enrolled under this 
                                section; and
                                    ``(II) meets the requirements 
                                necessary to maintain its status as a 
                                certified standard health plan with 
                                respect to individuals enrolled under 
                                this section that do not conflict with 
                                any of the requirements under this 
                                section.
                    ``(B) Reasonable cost reimbursement contracts.--The 
                Secretary may enter into a reasonable cost 
                reimbursement contract (as defined in paragraph (4)(C)) 
                with any certified standard health plan in a service 
                area if--
                            ``(i)(I) the plan so elects;
                            ``(II) the Secretary is not satisfied that 
                        the plan has the capacity to bear the risk of 
                        potential losses under a risk contract under 
                        this section, or
                            ``(III) the plan has an insufficient number 
                        of individuals enrolled to be eligible to enter 
                        into a risk contract; and
                            ``(ii) the Secretary is otherwise satisfied 
                        that the plan is able to perform its 
                        contractual obligations effectively and 
                        efficiently.
            ``(2) Availability of plans.--
                    ``(A) In general.--Subject to the provisions of 
                subsection (e), every individual entitled to benefits 
                under part A and enrolled under part B shall be 
                eligible to enroll under this section with any 
                certified standard health plan with a contract under 
                this section which serves the service area in which the 
                individual resides, except that an employer-sponsored 
                plan may limit its enrollment to certain classes of 
                individuals, as designated by the Secretary in 
                regulations.
                    ``(B) Enrollment by an individual.--An individual 
                may enroll under this section with a certified standard 
                health plan with a contract under this section in such 
                manner as may be prescribed in regulations (including 
                enrollment through a third party) and the individual 
                may terminate enrollment--
                            ``(i) during an annual period as prescribed 
                        by the Secretary, and
                            ``(ii) as specified by the Secretary if the 
                        plan is financially insolvent, if the 
                        individual moves from the service area served 
                        by the plan, or if other special circumstances 
                        exist, as prescribed by the Secretary.
                    ``(C) Information.--
                            ``(i) Distribution by plans.--The Secretary 
                        may prescribe the procedures and conditions 
                        under which a certified standard health plan 
                        with a contract under this section may provide 
                        individuals eligible to enroll under this 
                        section with information about the plan. No 
                        brochures, application forms, or other 
                        promotional or informational material may be 
                        distributed by a 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, and
                                    ``(II) 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.
                            ``(ii) Distribution by the secretary.--The 
                        Secretary shall develop and distribute 
                        comparative materials to individuals eligible 
                        to enroll under this section regarding all 
                        certified standard health plans with contracts 
                        under this section.
            ``(3) Payments.--
                    ``(A) Payments in lieu of normal payments.--Subject 
                to subsection (i)(3), payments under a contract to a 
                certified standard health plan under this section shall 
                be instead of the amounts which (in the absence of the 
                contract) would be otherwise payable, pursuant to 
                sections 1814(b) and 1833(a), for services furnished by 
                or through the plan to individuals enrolled with the 
                plan under this section.
                    ``(B) Source of payment.--The payment to a 
                certified standard health plan under this section for 
                individuals enrolled under this section with the plan 
                and entitled to benefits under part A and enrolled 
                under part B shall be made from the Federal Hospital 
                Insurance Trust Fund and the Federal Supplementary 
                Medical Insurance Trust Fund. The portion of that 
                payment to the plan for a month to be paid by each 
                trust fund shall be determined as follows:
                            ``(i) With respect to expenditures by 
                        certified standard health plans with risk 
                        contracts under this section, the allocation 
                        shall be determined each year by the Secretary 
                        based on the ratio of expenditures from each 
                        trust fund for the preceding year to the 
                        expenditures from both trust funds for the 
                        preceding year.
                            ``(ii) With respect to expenditures by a 
                        certified standard health plan with a 
                        reasonable cost reimbursement contract under 
                        this section, the initial allocation shall be 
                        based on the plan's most recent budget, such 
                        allocation to be adjusted, as needed, after 
                        cost settlement to reflect the distribution of 
                        actual expenditures.
            ``(4) Definitions.--For purposes of this section:
                    ``(A) Certified standard health plan.--The term 
                `certified standard health plan' shall have the meaning 
                given such term in section 21011(a)(2).
                    ``(B) Service area.--The term `service area' means 
                the service areas designated by a State under section 
                21128.
                    ``(C) Reasonable cost reimbursement contract.--The 
                term `reasonable cost reimbursement contract' means a 
                contract with a certified standard health plan pursuant 
                to which such plan is reimbursed on the basis of its 
                reasonable cost (as defined in section 1861(v)) in the 
                manner prescribed in subsection (c)(2).
    ``(b) Payment Rules under Risk Contracts.--
            ``(1) In General.--
                    ``(A) Payments.--Except as provided in subparagraph 
                (C), with respect to any calendar year, each certified 
                standard health plan with a risk contract under this 
                section shall receive a payment under this title with 
                respect to each individual enrolled with the plan for 
                each month such individual is enrolled equal to the 
                average medicare per capita rate determined under 
                paragraph (2) for the plan's service area adjusted by 
                the rate factor determined under subparagraph (B) for 
                the class of such individual.
                    ``(B) Determination of classes of individuals and 
                rate factors for such classes.--
                            ``(i) Determination of classes.--For 
                        purposes of this section, the Secretary shall 
                        define appropriate classes of individuals, 
                        based on age, disability status, and such other 
                        factors as the Secretary determines to be 
                        appropriate.
                            ``(ii) Rate factors.--The Secretary shall 
                        annually determine the rate factors for each 
                        class of individuals defined in clause (i) 
                        reflecting the differences in the average per 
                        capita spending for benefits under parts A and 
                        B among individuals in such classes. The 
                        Secretary shall announce such rate factors (in 
                        a manner intended to provide notice to 
                        interested parties) not later than July 1 
                        before the calendar year concerned.
                    ``(C) Budget neutrality.--The Secretary shall 
                reduce the amount of payments to be made to certified 
                standard health plans under subparagraph (A) for a year 
                by an amount the Secretary determines necessary so that 
                such payments do not exceed an amount equal to the 
                total amount that would have been paid under this 
                section for the year if section 601 of the Health 
                Security Act had not been enacted.
            ``(2) Determination of average medicare per capita rate.--
                    ``(A) Determination by Secretary.--
                            ``(i) In general.--The Secretary shall 
                        annually determine under subparagraph (B), and 
                        shall announce (in a manner intended to provide 
                        notice to interested parties) not later than 
                        October 1 before the calendar year concerned, 
                        the average medicare per capita rate of payment 
                        for each service area.
                    ``(B) Formula for average medicare per capita 
                rate.--
                            ``(i) In general.--The monthly average 
                        medicare per capita rate of payment for a 
                        service area served by a certified standard 
                        health plan shall be equal to the sum of--
                                    ``(I) the plan component determined 
                                under clause (ii); and
                                    ``(II) the fee-for-service 
                                component determined under clause 
                                (iii).
                            ``(ii) Plan component.--The amount 
                        determined under this clause is the sum of the 
                        following amounts determined with respect to 
                        each certified standard health plan--
                                    ``(I) the amount of the uniform 
                                monthly premium submitted by the plan 
                                to the Secretary under subparagraph 
                                (C), adjusted by a factor determined by 
                                the Secretary to normalize the 
                                difference in the distribution of 
                                individuals projected to be enrolled in 
                                the plan among the various classes of 
                                individuals defined by the Secretary to 
                                the national distribution of all 
                                individuals in the program under this 
                                title among such classes; multiplied by
                                    ``(II) a fraction (expressed as a 
                                percentage), the numerator of which is 
                                the number of all individuals enrolled 
                                in the plan (as projected by the plan 
                                using either historical experience or 
                                some other methodology developed by the 
                                Secretary), and the denominator of 
                                which is the number of all medicare 
                                eligible individuals in the service 
                                area.
                            ``(iii) Fee-for-service component.--The 
                        amount determined under this clause is--
                                    ``(I) the projected average monthly 
                                per capita fee-for-service costs (as 
                                defined in subparagraph (D)) for the 
                                service area for individuals not 
                                enrolled in certified standard health 
                                plans with contracts under this 
                                section, adjusted by the factor 
                                described in clause (ii)(I); multiplied 
                                by
                                    ``(II) a fraction (expressed as a 
                                percentage), the numerator of which is 
                                equal to the number of all medicare 
                                eligible individuals in the service 
                                area minus the number of individuals 
                                who are enrolled in certified standard 
                                health plans with risk contracts under 
                                this section (as determined in 
                                accordance with subclause (I)), and the 
                                denominator of which is the number of 
                                all medicare eligible individuals in 
                                the service area.
                    ``(C) Uniform monthly premiums; premium for 
                additional services.--
                            ``(i) In general.--Each certified standard 
                        health plan with a risk contract under this 
                        section shall, not later than August 1 of each 
                        year, submit to the Secretary a bid for the 
                        next calendar year for each service area with 
                        respect to which the plan has a risk contract. 
                        A bid with respect to a service area shall 
                        include the following:
                                    ``(I) Uniform monthly premium.--A 
                                statement of the uniform monthly 
                                premium amount that the plan intends to 
                                charge for individuals enrolled under 
                                this section with the plan and entitled 
                                to benefits under part A and enrolled 
                                in part B and a projection of the 
                                plan's enrollment by class for such 
                                services in the service area.
                                    ``(II) Premium for additional 
                                services.--A statement of the premium 
                                amount that the plan intends to charge 
                                for each class of individuals enrolled 
                                under this section with the plan for 
                                the additional mandatory services 
                                described in subparagraphs (A)(ii) and 
                                (B) of subsection (d)(1).
                                    ``(III) Premium for additional 
                                health care services.--A statement of 
                                the premium amount that the plan 
                                intends to charge for each package of 
                                additional health care services offered 
                                by the plan.
                            ``(ii) Notice before bid submissions.--At 
                        least 45 days before the date for submitting 
                        bids under clause (ii) for a year, the 
                        Secretary shall provide for notice to certified 
                        standard health plans with risk contracts of 
                        proposed changes to be made in the methodology 
                        or benefit coverage assumptions from the 
                        methodology and assumptions used in the 
                        previous calendar year and shall provide such 
                        plans an opportunity to comment on such 
                        proposed changes.
                    ``(D) Projected average monthly per capita fee-for-
                service costs.--
                            ``(i) In general.--For purposes of 
                        subparagraph (B), the term `projected average 
                        monthly per capita fee-for-service costs' 
                        means, with respect to a service area, the 
                        amount, prorated to be expressed as a monthly 
                        amount, that the Secretary estimates in advance 
                        would be payable in any contract year for 
                        services covered under parts A and B and types 
                        of expenses otherwise reimbursable under parts 
                        A and B (including administrative costs 
                        incurred by organizations described in sections 
                        1816 and 1842), if the services were to be 
                        furnished by other than a certified standard 
                        health plan with a risk contract under this 
                        section.
                            ``(ii) Basis for estimates.--The estimate 
                        made by the Secretary under clause (i) shall be 
                        made on the basis of actual experience of the 
                        service area or, if the Secretary determines 
                        that the data in that service area are 
                        inadequate to make an accurate estimate, the 
                        Secretary may use the actual experience of a 
                        similar area, with appropriate adjustments to 
                        assure actuarial equivalence, including 
                        adjustments the Secretary may determine 
                        appropriate to adjust for demographics, health 
                        status, and the presence of specific medical 
                        conditions.
            ``(3) Payment rules.--
                    ``(A) Amount of premium.--Each certified standard 
                health plan with a contract under this section must 
                provide to individuals enrolled with the plan under 
                this section, for the duration of such enrollment 
                during each contract period, a fixed monthly premium 
                equal to the sum of the uniform monthly premium amount 
                determined by the plan with respect to the individual 
                under paragraph (2)(C) and the premium amount 
                determined under such paragraph for the additional 
                mandatory services described in subparagraphs (A)(ii) 
                and (B) of subsection (d)(1). An individual enrolled in 
                the plan shall be responsible for paying to the plan 
                the difference between the fixed monthly premium amount 
                described in the preceding sentence and the average 
                medicare per capita rate paid to the plan in accordance 
                with subparagraph (B).
                    ``(B) Average medicare per capita rate.--
                            ``(i) In general.--The Secretary shall make 
                        monthly payments in advance and in accordance 
                        with the rate determined under paragraph (2) to 
                        each certified standard health plan with a risk 
                        contract under this section for each individual 
                        enrolled with the plan under this section.
                            ``(ii) Adjustments.--
                                    ``(I) In general.--The amount of 
                                payment under this paragraph may be 
                                retroactively adjusted to take into 
                                account any difference between the 
                                actual number of individuals enrolled 
                                in the plan under this section and the 
                                number of such individuals estimated to 
                                be so enrolled in determining the 
                                amount of the advance payment.
                                    ``(II) Special rule.--The Secretary 
                                may make retroactive adjustments under 
                                subclause (I) to take into account 
                                individuals enrolled during the period 
                                beginning on the date on which the 
                                individual enrolls with a certified 
                                standard health plan with a risk 
                                contract under this section under a 
                                health benefit plan operated, 
                                sponsored, or contributed to, by the 
                                individual's employer or former 
                                employer (or the employer or former 
                                employer of the individual's spouse) 
                                and ending on the date on which the 
                                individual is enrolled in the plan 
                                under this section, except that for 
                                purposes of making such retroactive 
                                adjustments under this clause, such 
                                period may not exceed 90 days. No 
                                adjustment may be made under the 
                                preceding sentence with respect to any 
                                individual who does not certify that 
                                the plan provided the individual with 
                                the explanation described in subsection 
                                (e)(6) at the time the individual 
                                enrolled with the plan.
                            ``(iii) Payment to plan only.--Subject to 
                        subsection (i)(3), if an individual is enrolled 
                        under this section with a certified standard 
                        health plan with a risk contract under this 
                        section, only the plan shall be entitled to 
                        receive payments from the Secretary under this 
                        title for services furnished to the individual.
                    ``(C) Payment greater than fixed monthly premium.--
                If, with respect to any individual enrolled in a 
                certified standard health plan with a risk contract 
                under this section, the average medicare per capita 
                rate paid under this section to the plan exceeds the 
                fixed monthly premium amount described in subparagraph 
                (A), the plan shall pay such excess to the individual, 
                at the election of the plan, in the form of cash or as 
                a contribution to a premium for any policy for 
                additional health care services.
    ``(c) Payment rules for reasonable cost reimbursement contracts.--
            ``(1) Reimbursement.--
                    ``(A) In general.--A certified standard health plan 
                with a reasonable cost reimbursement contract under 
                this section may, at the option of such plan, provide 
                that the Secretary--
                            ``(i) will reimburse hospitals and skilled 
                        nursing facilities either for the reasonable 
                        cost (as determined under section 1861(v)) or 
                        for payment amounts determined in accordance 
                        with section 1886, as applicable, of services 
                        furnished to individuals enrolled with such 
                        plan, and
                            ``(ii) will deduct the amount of such 
                        reimbursement from payment which would 
                        otherwise be made to such plan.
                    ``(B) Direct payments.--If a certified standard 
                health plan with a reasonable cost reimbursement 
                contract under this section pays a hospital or skilled 
                nursing facility directly, the amount paid shall not 
                exceed the reasonable cost of the services (as 
                determined under section 1861(v)) or the amount 
                determined under section 1886, as applicable, unless 
                such plan demonstrates to the satisfaction of the 
                Secretary that such excess payments are justified on 
                the basis of advantages gained by the plan.
            ``(2) Payments to plans.--Payments made to a certified 
        standard health plan with a reasonable cost reimbursement 
        contract under this section shall be subject to appropriate 
        retroactive corrective adjustment at the end of each contract 
        year so as to assure that such plan is paid for the reasonable 
        cost actually incurred (excluding any part of incurred cost 
        found to be unnecessary in the efficient delivery of health 
        services) or the amounts otherwise determined under section 
        1886 for the types of expenses otherwise reimbursable under 
        this title for providing services covered under this title to 
        individuals enrolled in the plan.
            ``(3) Reports by plans.--A certified standard health plan 
        with a reasonable cost reimbursement contract under this 
        subsection shall provide that the Secretary shall require, at 
        such time following the expiration of each accounting period of 
        the plan (and in such form and in such detail) as the Secretary 
        may prescribe--
                    ``(A) that the plan report to the Secretary in an 
                independently certified financial statement its per 
                capita incurred cost based on the types of components 
                of expenses otherwise reimbursable under this title for 
                providing services under parts A and B, including 
                therein, in accordance with accounting procedures 
                prescribed by the Secretary, its methods of allocating 
                costs between individuals enrolled under this section 
                and other individuals enrolled with such plan;
                    ``(B) that failure to report such information as 
                may be required may be deemed to constitute evidence of 
                likely overpayment on the basis of which appropriate 
                collection action may be taken;
                    ``(C) that in any case in which a plan is related 
                to another plan by common ownership or control, a 
                consolidated financial statement shall be filed and 
                that the allowable costs for such organization may not 
                include costs for the types of expense otherwise 
                reimbursable under this title, in excess of those which 
                would be determined to be reasonable in accordance with 
                regulations (providing for limiting reimbursement to 
                costs rather than charges to the plan by related plans 
                and owners) issued by the Secretary; and
                    ``(D) that in any case in which compensation is 
                paid by a plan substantially in excess of what is 
                normally paid for similar services by similar 
                practitioners (regardless of method of compensation), 
                such compensation may as appropriate be considered to 
                constitute a distribution of profits.
    ``(d) Coverage of Benefits.--
            ``(1)In general.--
                    ``(A) Services provided.--A certified standard 
                health plan with a contract under this section must 
                provide to individuals enrolled in the plan under this 
                section, through providers and other persons that meet 
                the applicable requirements of this title and part A of 
                title XI--
                            ``(i) except as provided in subparagraph 
                        (B), the services covered under parts A and B 
                        of this title; and
                            ``(ii) preventive care services, as defined 
                        by the Secretary.
                    ``(B) Additions to part a coverage.--For purposes 
                of subparagraph (A)(i)--
                            ``(i) inpatient hospital services shall not 
                        be limited to 150 days pursuant to section 
                        1812(a)(1); and
                            ``(ii) the requirement that an individual 
                        be an inpatient in a hospital for 3 consecutive 
                        days prior to the individual's receipt of post-
                        hospital extended care services pursuant to 
                        section 1861(i) shall not apply.
            ``(2) Provision of medically necessary care.--Each 
        certified standard health plan with a contract under this 
        section must--
                    ``(A) make the services described in paragraph (1) 
                (and such other health care services as enrolled 
                individuals have contracted for)--
                            ``(i) available and accessible to enrolled 
                        individuals within the service area with 
                        reasonable promptness and in a manner which 
                        assures continuity, and
                            ``(ii) when medically necessary, available 
                        and accessible twenty-four hours a day and 
                        seven days a week, and
                    ``(B) provide for reimbursement with respect to 
                services which are described in subparagraph (A) and 
                which are provided to such an individual other than 
                through the plan, if--
                            ``(i) the services were medically necessary 
                        and immediately required because of an 
                        unforeseen illness, injury, or condition, and
                            ``(ii) it was not reasonable given the 
                        circumstances to obtain the services through 
                        the plan.
            ``(3) Special exception.--If there is a national coverage 
        determination made in the period beginning on the date for the 
        submission of bids under subsection (b)(2)(C) and ending on the 
        next such date of submission that the Secretary projects will 
        result in a significant change in the costs to a certified 
        standard health plan with a risk contract under this section of 
        providing the benefits that are the subject of such national 
        coverage determination and that was not incorporated in the 
        determination of the bid for such period, and if such coverage 
        determination provides for coverage of additional benefits or 
        under additional circumstances, subsection (a)(3)(A) shall not 
        apply to payment for such additional benefits or benefits 
        provided under such additional circumstances until the first 
        contract year that begins after the end of such period, unless 
        otherwise required by law.
            ``(4) Cost sharing.--
                    ``(A) In general.--Each certified standard health 
                plan with a contract under this section must provide to 
                individuals enrolled under this section with respect to 
                the services described in paragraph (1), cost sharing 
                requirements that are no greater than the cost sharing 
                requirements for such services under the plan for 
                individuals not enrolled in the plan under this 
                section.
                    ``(B) Cost sharing fixed during contract period.--
                Each certified standard plan must provide to 
                individuals enrolled under this section, for the 
                duration of such enrollment during each contract 
                period, cost sharing that is fixed during the duration 
                of the contract period.
    ``(e) Enrollment Periods.--
            ``(1) In general.--Each certified standard health plan with 
        a contract under this section must have an open enrollment 
        period (which may be specified by the Secretary), for the 
        enrollment of individuals under this section, of at least 30 
        days duration every year and for the additional periods 
        specified under paragraphs (2) through (4), and must provide 
        that at any time during which enrollments are accepted, the 
        plan will accept up to the limits of its capacity (as 
        determined by the Secretary) and without restrictions, except 
        as may be authorized in regulations, individuals who are 
        eligible to enroll in the plan in the order in which they apply 
        for enrollment, unless to do so would result in failure to meet 
        the requirements of subsection (f) or would result in the 
        enrollment of enrollees substantially nonrepresentative, as 
        determined in accordance with regulations of the Secretary, of 
        the population in the service area served by the plan.
            ``(2) Nonrenewal or termination.--
                    ``(A) In general.--If a contract under this section 
                is not renewed or is otherwise terminated, certified 
                standard health plans with contracts under this section 
                and serving the same service area as under the 
                terminated contract are required to have an open 
                enrollment period for individuals who were enrolled 
                under the terminated contract as of the date of notice 
                of such termination.
                    ``(B) Open enrollment period.--The open enrollment 
                periods required under subparagraph (A) shall be for 30 
                days and shall begin 30 days after the date that the 
                Secretary provides notice of such requirement.
                    ``(C) Effectiveness of enrollment.--Enrollment 
                under this paragraph shall be effective 30 days after 
                the end of the open enrollment period, or, if the 
                Secretary determines that such date is not feasible, 
                such other date as the Secretary specifies.
            ``(3) Special rule.--Each certified standard health plan 
        with a contract under this section shall have an open 
        enrollment period for each individual who enrolls in a plan 
        during any enrollment period specified by section 1837 that 
        applies to that individual. Enrollment under this clause shall 
        be effective as specified by section 1838.
            ``(4) Residents outside service area.--Each certified 
        standard health plan with a contract under this section shall 
        have an open enrollment period for each individual eligible to 
        enroll in such a plan who has previously resided outside the 
        service area. The enrollment period shall begin with the 
        beginning of the month that precedes the month in which the 
        individual becomes a resident of that service area and shall 
        end at the end of the following month. Enrollment under this 
        subparagraph shall be effective as of the first of the month 
        following the month in which the individual enrolls.
            ``(5) Continued enrollment protected.--Each certified 
        standard health plan with a contract under this section must 
        provide assurances to the Secretary that it will not expel or 
        refuse to re-enroll any enrolled individual because of the 
        individual's health status or requirements for health care 
        services, and that it will notify each such individual of such 
        fact at the time of the individual's enrollment.
            ``(6) Notice of rights, etc.--Each certified standard 
        health plan with a contract under this section shall provide 
        each enrollee, at the time of enrollment and not less 
        frequently than annually thereafter, an explanation of the 
        enrollee's rights under this section, including an explanation 
        of--
                    ``(A) the enrollee's rights to benefits from the 
                plan,
                    ``(B) the restrictions on payments under this title 
                for services furnished other than by or through the 
                plan,
                    ``(C) out-of-area coverage provided by the plan,
                    ``(D) the plan's coverage of emergency services and 
                urgently needed care,
                    ``(E) appeal rights of enrollees, and
                    ``(F) the health care providers with whom the plan 
                has entered into contracts for the provision of 
                services.
            ``(7) Continuation of coverage.--Each certified standard 
        plan that provides items and services pursuant to a contract 
        under this section shall provide assurances to the Secretary 
        that in the event the plan ceases to provide such items and 
        services, the plan shall provide or arrange for supplemental 
        coverage of benefits under this title related to a pre-existing 
        condition with respect to any exclusion period, to all 
        individuals enrolled with the plan who receive benefits under 
        this title, for the lesser of six months or the duration of 
        such period.
            ``(8) Notice of right of termination.--
                    ``(A) In general.--Each certified standard health 
                plan with a risk contract under this section shall 
                notify individuals eligible to enroll with the plan 
                under this section and individuals enrolled with the 
                plan under this section that--
                            ``(i) the plan is authorized by law to 
                        terminate or refuse to renew the contract, and
                            ``(ii) termination or nonrenewal of the 
                        contract may result in termination of the 
                        enrollments of individuals enrolled with the 
                        plan under this section.
                    ``(B) Placement of notice.--The notice required by 
                subparagraph (A) shall be included in--
                            ``(i) any marketing materials described in 
                        subsection (a)(2)(C) that are distributed by a 
                        plan to individuals eligible to enroll under 
                        this section with the plan, and
                            ``(ii) any explanation provided to 
                        enrollees by the plan pursuant to paragraph 
                        (6).
    ``(f) Membership Enrollment Requirements.--
            ``(1) In general.--Each certified standard health plan with 
        a contract under this section shall have, for the duration of 
        such contract, an enrolled membership at least one-half of 
        which consists of individuals who are not entitled to benefits 
        under this title or under a State plan approved under title 
        XIX.
            ``(2) Waiver.--
                    ``(A) In general.--The Secretary may modify or 
                waive the requirement imposed by paragraph (1) if the 
                plan demonstrates that it provides for an adequate 
                quality of care for beneficiaries by--
                            ``(i) meeting the quality standards for 
                        plans with contracts under this section;
                            ``(ii) meeting the fiscal soundness 
                        requirements under title XIII of the Public 
                        Health Service Act and any such requirements 
                        necessary to remain a certified standard health 
                        plan for at least the 3 years immediately 
                        preceding an application for a waiver under 
                        this paragraph;
                            ``(iii) demonstrating successful 
                        operational experience as a certified standard 
                        health plan with a contract under this section 
                        for at least the 3 years immediately preceding 
                        an application for a waiver under this 
                        paragraph; and
                            ``(iv) demonstrating that the number of 
                        individuals enrolled in the plan or its parent 
                        organization is at least 50,000 at the time of 
                        application for a waiver under this paragraph.
                    ``(B) Standards.--In reviewing a plan's quality 
                performance, the Secretary may accept quality 
                performance standards as measured by private 
                organizations acceptable to the Secretary or 
                organizations designated by the Secretary, including 
                peer review organizations.
            ``(3) Suspension of enrollment.--If the Secretary 
        determines that a certified standard health plan with a 
        contract under this section has failed to comply with the 
        requirements of this subsection, the Secretary may provide for 
        the suspension of enrollment of individuals under this section 
        or of payment to the plan under this section for individuals 
        newly enrolled with the plan, after the date the Secretary 
        notifies the plan of such noncompliance.
            ``(4) Termination of requirement.--The Secretary may 
        terminate the requirement under paragraph (1) when the 
        Secretary determines that health plans have established 
        alternative quality assurance mechanisms that effectively 
        provide sufficient quality safeguards.
    ``(g) Payment Rules for Plans.--
            ``(1) Subrogation rights.--Notwithstanding any other 
        provision of law, each certified standard health plan with a 
        contract under this section may (in the case of the provision 
        of services to an individual enrolled under this section by a 
        primary plan under section 1862(b)(2)) charge or authorize the 
        provider of such services to charge, in accordance with the 
        charges allowed under such law or policy--
                    ``(A) the insurance carrier, employer, or other 
                entity which under such law, plan, or policy is to pay 
                for the provision of such services, or
                    ``(B) such individual to the extent that the 
                individual has been paid under such law, plan, or 
                policy for such services.
            ``(2) Prompt payment requirement.--
                    ``(A) In general.--A risk contract under this 
                section shall require the certified standard health 
                plan to provide prompt payment (consistent with the 
                provisions of sections 1816(c)(2) and 1842(c)(2)) of 
                claims submitted for services and supplies furnished to 
                individuals pursuant to such contract, if the services 
                or supplies are not furnished under a contract between 
                the plan and the provider or supplier.
                    ``(B) Failure.--In the case of a plan which the 
                Secretary determines, after notice and opportunity for 
                a hearing, has failed to make payments of amounts in 
                compliance with subparagraph (A), the Secretary may 
                provide for direct payment of the amounts owed to 
                providers and suppliers for such covered services 
                furnished to individuals enrolled under this section 
                under the contract. If the Secretary provides for such 
                direct payments, the Secretary shall provide for an 
                appropriate reduction in the amount of payments 
                otherwise made to the plan under this section to 
                reflect the amount of the Secretary's payments (and 
                costs incurred by the Secretary in making such 
                payments).
    ``(h) Duration, Termination, Effective Date, and Terms of Contract; 
Powers and Duties of Secretary.--
            ``(1) Duration and termination.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), each contract under this section 
                shall be for a term of at least one year, as determined 
                by the Secretary, and may be made automatically 
                renewable from term to term in the absence of notice by 
                either party of intention to terminate at the end of 
                the current term.
                    ``(B) Exception.--The Secretary may terminate a 
                contract at any time (after such reasonable notice and 
                opportunity for hearing to the certified standard 
                health plan involved as the Secretary may provide in 
                regulations), if the Secretary finds that the plan--
                            ``(i) has failed substantially to carry out 
                        the contract,
                            ``(ii) is carrying out the contract in a 
                        manner inconsistent with the efficient and 
                        effective administration of this section, or
                            ``(iii) no longer substantially complies 
                        with the requirements of this section.
            ``(2) Effective date.--The effective date of any contract 
        executed pursuant to this section shall be specified in the 
        contract.
            ``(3) Terms.--Each contract under this section--
                    ``(A) shall provide that the Secretary, or any 
                person or organization designated by the Secretary--
                            ``(i) shall have the right to inspect or 
                        otherwise evaluate--
                                    ``(I) the quality, appropriateness, 
                                and timeliness of services performed 
                                under the contract, and
                                    ``(II) the facilities of the 
                                organization when there is reasonable 
                                evidence of some need for such 
                                inspection, and
                            ``(ii) shall have the right to audit and 
                        inspect any books and records of the certified 
                        standard health plan that pertain--
                                    ``(I) to the ability of the plan to 
                                bear the risk of potential financial 
                                losses, or
                                    ``(II) to services performed or 
                                determinations of amounts payable under 
                                the contract;
                    ``(B) shall require the plan with a contract to 
                provide (and pay for) written notice in advance of the 
                contract's termination, as well as a description of 
                alternatives for obtaining benefits under this title, 
                to each individual enrolled under this section with the 
                plan; and
                    ``(C)(i) shall require the plan to comply with 
                subsections (a) and (c) of section 1318 of the Public 
                Health Service Act (relating to disclosure of certain 
                financial information) and with the requirement of 
                section 1301(c)(8) of such Act (relating to liability 
                arrangements to protect members);
                    ``(ii) shall require the plan to provide and supply 
                information determined appropriate by the Secretary in 
                the manner determined appropriate by the Secretary;
                    ``(iii) shall require the plan to notify the 
                Secretary of loans and other special financial 
                arrangements which are made between the plan and 
                subcontractors, affiliates, and related parties; and
                    ``(D) shall contain such other terms and conditions 
                not inconsistent with this section (including requiring 
                the organization to provide the Secretary with such 
                information) as the Secretary may find necessary and 
                appropriate.
            ``(4) Period of disqualification.--The Secretary may not 
        enter into a risk contract with a certified standard health 
        plan if a previous risk contract with that plan under this 
        section was terminated at the request of the plan within the 
        preceding five-year period, except in circumstances which 
        warrant special consideration, as determined by the Secretary.
            ``(5) Disregard of certain inconsistent laws, etc.--The 
        authority vested in the Secretary by this section may be 
        performed without regard to such provisions of law or 
        regulations relating to the making, performance, amendment, or 
        modification of contracts of the United States as the Secretary 
        may determine to be inconsistent with the furtherance of the 
        purpose of this title.
            ``(6) Findings of failure.--
                    ``(A) In general.--If the Secretary determines that 
                a certified standard health plan with a contract under 
                this section--
                            ``(i) fails substantially to provide 
                        medically necessary items and services that are 
                        required (under law or under the contract) to 
                        be provided to an individual covered under the 
                        contract, if the failure has adversely affected 
                        (or has substantial likelihood of adversely 
                        affecting) the individual;
                            ``(ii) imposes premiums on individuals 
                        enrolled under this section in excess of the 
                        premiums permitted;
                            ``(iii) acts to expel or to refuse to re-
                        enroll an individual in violation of the 
                        provisions of this section;
                            ``(iv) engages in any practice that would 
                        reasonably be expected to have the effect of 
                        denying or discouraging enrollment (except as 
                        permitted by this section) by eligible 
                        individuals with the plan whose medical 
                        condition or history indicates a need for 
                        substantial future medical services;
                            ``(v) misrepresents or falsifies 
                        information that is furnished--
                                    ``(I) to the Secretary under this 
                                section, or
                                    ``(II) to an individual or to any 
                                other entity under this section;
                            ``(vi) fails to comply with the 
                        requirements of subsection (g)(2)(A) or 
                        paragraph (8);
                            ``(vii) employs or contracts with any 
                        individual or entity that is excluded from 
                        participation under this title under section 
                        1128 or 1128A for the provision of health care, 
                        utilization review, medical social work, or 
                        administrative services or employs or contracts 
                        with any entity for the provision (directly or 
                        indirectly) through such an excluded individual 
                        or entity of such services; or
                            ``(viii) substantially fails to cooperate 
                        with the utilization and quality control peer 
                        review organization;
                the Secretary may provide, in addition to any other 
                remedies authorized by law, for any of the remedies 
                described in subparagraph (B).
                    ``(B) Remedies.--The remedies described in this 
                subparagraph are--
                            ``(i) civil money penalties of not more 
                        than $ 25,000 for each determination under 
                        subparagraph (A) or, with respect to a 
                        determination under clause (iv) or (v)(I) of 
                        such subparagraph, of not more than $ 100,000 
                        for each such determination, plus, with respect 
                        to a determination under subparagraph (A)(ii), 
                        double the excess amount charged in violation 
                        of such subparagraph (and the excess amount 
                        charged shall be deducted from the penalty and 
                        returned to the individual concerned), and 
                        plus, with respect to a determination under 
                        subparagraph (A)(iv), $ 15,000 for each 
                        individual not enrolled as a result of the 
                        practice involved,
                            ``(ii) suspension of enrollment of 
                        individuals under this section after the date 
                        the Secretary notifies the plan of a 
                        determination under subparagraph (A) and until 
                        the Secretary is satisfied that the basis for 
                        such determination has been corrected and is 
                        not likely to recur, or
                            ``(iii) suspension of payment to the plan 
                        under this section for individuals enrolled 
                        after the date the Secretary notifies the plan 
                        of a determination under subparagraph (A) and 
                        until the Secretary is satisfied that the basis 
                        for such determination has been corrected and 
                        is not likely to recur.
                The provisions of section 1128A (other than subsections 
                (a) and (b)) shall apply to a civil money penalty under 
                clause (i) in the same manner as they apply to a civil 
                money penalty or proceeding under section 1128A(a).
            ``(7) Agreement with utilization and quality control peer 
        review organization.--
                    ``(A) In general.--Each risk contract with a 
                certified standard health plan under this section shall 
                provide that the plan will maintain an agreement with a 
                utilization and quality control peer review 
                organization (which has a contract with the Secretary 
                under part B of title XI for the area in which the 
                eligible organization is located) or with an entity 
                selected by the Secretary under section 1154(a)(4)(C) 
                under which the review organization will perform 
                functions under section 1154(a)(4)(B) and section 
                1154(a)(14) (other than those performed under contracts 
                described in section 1866(a)(1)(F)) with respect to 
                services, furnished by the plan, for which payment may 
                be made under this title.
                    ``(B) Cost of services.--For purposes of payment 
                under this title, the cost of such agreement to the 
                plan shall be considered a cost incurred by a provider 
                of services in providing covered services under this 
                title and shall be paid directly by the Secretary to 
                the review organization on behalf of such plan in 
                accordance with a schedule established by the 
                Secretary.
                    ``(C) Source of payments.--Such payments--
                            ``(i) shall be transferred in appropriate 
                        proportions from the Federal Hospital Insurance 
                        Trust Fund and from the Supplementary Medical 
                        Insurance Trust Fund, without regard to amounts 
                        appropriated in advance in appropriation Acts, 
                        in the same manner as transfers are made for 
                        payment for services provided directly to 
                        beneficiaries, and
                            ``(ii) shall not be less in the aggregate 
                        for such plans for a fiscal year than the 
                        amounts the Secretary determines to be 
                        sufficient to cover the costs of such plans' 
                        conducting activities described in subparagraph 
                        (A) with respect to such plans under part B of 
                        title XI.
    ``(i) Other General Requirements on Plans.--
            ``(1) Grievance procedures.--Each certified standard health 
        plan with a contract under this section must provide meaningful 
        procedures for hearing and resolving grievances between the 
        plan (including any entity or individual through which the plan 
        provides health care services) and individuals enrolled with 
        the plan under this section.
            ``(2) Appeals.--An individual enrolled with a certified 
        standard health plan under this section who is dissatisfied by 
        reason of the individual's failure to receive any health 
        service to which the individual believes the individual is 
        entitled and at no greater charge than the individual believes 
        the individual is required to pay is entitled, if the amount in 
        controversy is $100 or more, to a hearing before the Secretary 
        to the same extent as is provided in section 205(b), and in any 
        such hearing the Secretary shall make the plan a party. If the 
        amount in controversy is $1,000 or more, the individual or plan 
        shall, upon notifying the other party, be entitled to judicial 
        review of the Secretary's final decision as provided in section 
        205(g), and both the individual and the plan shall be entitled 
        to be parties to that judicial review.
            ``(3) Advance directives.--A contract under this section 
        shall provide that the certified standard health plan shall 
        meet the requirement of section 1866(f) (relating to 
        maintaining written policies and procedures respecting advance 
        directives).
            ``4) Special requirement relating to subsection (d) 
        hospitals.--A risk contract under this section shall provide 
        that in the case of an individual who is receiving inpatient 
        hospital services from a subsection (d) hospital (as defined in 
        section 1886(d)(1)(B)) as of the effective date of the 
        individual's--
                    ``(A) enrollment with such plan under this 
                section--
                            ``(i) payment for such services until the 
                        date of the individual's discharge shall be 
                        made under this title as if the individual were 
                        not enrolled with the plan,
                            ``(ii) the plan shall not be financially 
                        responsible for payment for such services until 
                        the date after the date of the individual's 
                        discharge, and
                            ``(iii) the plan shall nonetheless be paid 
                        the full amount otherwise payable to the plan 
                        under this section; or
                    ``(B) termination of enrollment with a plan under 
                this section--
                            ``(i) the plan shall be financially 
                        responsible for payment for such services after 
                        such date and until the date of the 
                        individual's discharge,
                            ``(ii) payment for such services during the 
                        stay shall not be made under section 1886(d), 
                        and
                            ``(iii) the plan shall not receive any 
                        payment with respect to the individual under 
                        this section during the period the individual 
                        is not enrolled.
    ``(j) Limit on charges for certain services.--
            ``(1) In general.--(A) In the case of physicians' services 
        or renal dialysis services described in paragraph (2) which are 
        furnished by a participating physician to an individual 
        enrolled with a certified standard health plan under this 
        section and enrolled under part B, the applicable participation 
        agreement is deemed to provide that the physician or provider 
        of services or renal dialysis facility will accept as payment 
        in full from the eligible plan the amount that would be payable 
        to the physician or provider of services or renal dialysis 
        facility under part B and from the individual under such part, 
        if the individual were not enrolled with a plan under this 
        section.
            ``(B) In the case of physicians' services described in 
        paragraph (2) which are furnished by a nonparticipating 
        physician, the limitations on actual charges for such services 
        otherwise applicable under part B (to services furnished by 
        individuals not enrolled with an eligible organization under 
        this section) shall apply in the same manner as such 
        limitations apply to services furnished to individuals not 
        enrolled with such an organization.
            ``(2) Services described.--The `physicians' services 
        described in this paragraph are physicians' services which are 
        furnished to an enrollee of a certified standard health plan 
        under this section by a physician, provider of services, or 
        renal dialysis facility who is not under a contract with the 
        plan.
    ``(k) Study on Certified Standard Health Plans.--
            ``(1) In general.--The Prospective Payment Assessment 
        Commission (established under section 1886(e)(2)) and the 
        Physician Payment Review Commission (established under section 
        1845) shall study and make recommendations to Congress on the 
        matters described in paragraph (2).
            ``(2) Matters described.--The matters described in this 
        paragraph include--
                    ``(A) ways in which enrollment in certified 
                standard health plans with risk contracts under this 
                section could be increased;
                    ``(B) alternatives to the current payment 
                methodology that might encourage more health plans to 
                enter into certified standard health plans with risk 
                contracts under this section and encourage more 
                individuals to enroll in such plans;
                    ``(C) whether the demographic characteristics and 
                health status of beneficiaries enrolled in certified 
                standard health plans with risk contracts under this 
                section differs from other individuals entitled to 
                benefits under part A and enrolled under part B; and
                    ``(D) whether the volume and quality of care 
                rendered to individuals enrolled in certified standard 
                health plans with risk contracts under this section 
                differs from that rendered to other individuals 
                entitled to benefits under part A and enrolled under 
                part B.''.
    (b) Technical and Conforming Amendments.--The Secretary of Health 
and Human Services shall, within 90 days of the date of the enactment 
of this section, submit to the appropriate committees of Congress, a 
legislative proposal providing for such technical and conforming 
amendments in the law as are required by the provisions of this 
section.
    (c) Effective Date.--The amendments made by this section shall be 
effective with respect to contracts entered into on or after January 1, 
1996.

                 PART II--PROVISIONS RELATED TO PART A

SEC. 611. INPATIENT HOSPITAL SERVICES UPDATE FOR PPS HOSPITALS.

    Section 1886(b)(3)(B)(i) (42 U.S.C. 1395ww(b)(3)(B)(i)) is 
amended--
            (1) by amending subclause (XII) to read as follows:
            ``(XII) for fiscal years 1997 through 2000, the market 
        basket percentage minus 2.0 percentage points for hospitals in 
        all areas, and''; and
            (2) in subclause (XIII), by striking ``1998'' and inserting 
        ``2001''.

SEC. 612. REDUCTION IN PAYMENTS FOR CAPITAL-RELATED COSTS FOR INPATIENT 
              HOSPITAL SERVICES.

    (a) Reduction in Base Payment Rates for PPS Hospitals.--Section 
1886(g)(1)(A) (42 U.S.C. 1395ww(g)(1)(A)) is amended by adding at the 
end the following new sentence: ``In addition to the reduction 
described in the preceding sentence, for discharges occurring after 
September 30, 1995, the Secretary shall reduce by 7.31 percent the 
unadjusted standard Federal capital payment rate (as described in 42 
CFR 412.308(c), as in effect on the date of the enactment of the Health 
Security Act) and shall reduce by 10.41 percent the unadjusted 
hospital-specific rate (as described in 42 CFR 412.328(e)(1), as in 
effect on the date of the enactment of the Health Security Act).''.
    (b) Reduction in Payments for PPS-Exempt Hospitals.--Section 
1861(v)(1) (42 U.S.C. 1395x(v)(1)) is amended by adding at the end the 
following new subparagraph:
    ``(T) Such regulations shall provide that, in determining the 
amount of the payments that may be made under this title with respect 
to the capital-related costs of inpatient hospital services furnished 
by a hospital that is not a subsection (d) hospital (as defined in 
section 1886(d)(1)(B)) or a subsection (d) Puerto Rico hospital (as 
defined in section 1886(d)(9)(A)), the Secretary shall reduce the 
amounts of such payments otherwise established under this title by 15 
percent for payments attributable to portions of cost reporting periods 
occurring during each of the fiscal years 1996 through 2003.''.

SEC. 613. REDUCTIONS IN DISPROPORTIONATE SHARE PAYMENTS.

    (a) In General.--Section 1886(d)(5)(F) (42 U.S.C. 1395ww(d)(5)(F)) 
is amended--
            (1) in clause (ii), by striking ``The amount'' and 
        inserting ``Subject to clause (ix), the amount''; and
            (2) by adding at the end the following new clauses:
    ``(ix) Notwithstanding any other provision of this subparagraph, 
the Secretary shall reduce the amount of any additional payment made to 
a hospital under this subparagraph for discharges occurring on or after 
October 1, 1997, by 25 percent.
    ``(x) Not later than July 1, 1996, the Secretary and the 
Prospective Payment Assessment Commission shall submit to the Congress 
a recommendation on a methodology for measuring and allocating funds 
for hospitals that receive an additional payment under this paragraph 
including a replacement for the fraction described in clause 
(vi)(II).''.

SEC. 614. REVISED PAYMENT METHODOLOGY FOR REHABILITATION AND LONG-TERM 
              CARE HOSPITALS.

    (a) Rehabilitation Hospitals and Distinct Part Units.--
            (1) Definition.--Section 1886(d)(1)(B) (42 U.S.C. 
        1395ww(d)(1)(B)) is amended by adding at the end the following 
        new sentence: ``In defining a rehabilitation hospital and a 
        rehabilitation unit of a hospital which is a distinct part of a 
        hospital, the Secretary shall take into account the impact of 
        new technologies, survival rates, and changes in the practice 
        of rehabilitation medicine.''.
            (2) Target amount calculation for rehabilitation hospitals 
        and distinct part units.--
                    (A) In general.--Section 1886(b)(3) (42 U.S.C. 
                1395ww(b)(3)) is amended--
                            (i) in subparagraph (A), by striking ``(D), 
                        and (E)'' and inserting ``(D), (E), and (F)'';
                            (ii) in subparagraph (B)(ii), by striking 
                        ``and (E)'' and inserting ``(E), and (F)''; and
                            (iii) by adding at the end the following 
                        new subparagraph:
                    ``(F)(i) Subject to clause (ii), for cost reporting 
                periods beginning on or after October 1, 1994, in the 
                case of a hospital described in subsection 
                (d)(1)(B)(ii) or a rehabilitation unit described in 
                such subparagraph, the term `target amount' means--
                            ``(I) with respect to the first 12-month 
                        cost reporting period in which this 
                        subparagraph is applied to the hospital or 
                        unit--
                                    ``(aa) the allowable operating 
                                costs of inpatient hospital services 
                                (as defined in subsection (a)(4)) 
                                recognized under this title for the 
                                hospital or unit for the 12-month cost 
                                reporting period (in this subparagraph 
                                referred to as the `base cost reporting 
                                period') preceding the first cost 
                                reporting period for which this 
                                subparagraph was in effect with respect 
                                to such hospital, increased (in a 
                                compounded manner), by
                                    ``(bb) the applicable percentage 
                                increases applied to such hospital or 
                                unit under this paragraph for cost 
                                reporting periods after the base cost 
                                reporting period and up to and 
                                including such first 12-month cost 
                                reporting period, or
                            ``(II) with respect to a later cost 
                        reporting period, the target amount for the 
                        preceding 12-month cost reporting period, 
                        increased by the applicable percentage increase 
                        under subparagraph (B).
                There shall be substituted for the allowable average 
                costs of inpatient hospital services determined under 
                subclause (I)(aa), the average of the allowable average 
                costs of inpatient hospital services (as so defined) 
                recognized under this title for the hospital or unit 
                for cost reporting periods beginning during fiscal 
                years 1990 and 1991 (if any).
                    ``(ii)(I) Notwithstanding the provisions of clause 
                (i), in the case of a hospital or unit to which the 
                last sentence of clause (i) applies, the hospital or 
                unit's target amount under such clause for a cost 
                reporting period shall be--
                            ``(aa) not less than 70 percent of the 
                        national weighted average of all target amounts 
                        calculated under such clause for all hospitals 
                        and units described in such clause (as 
                        determined by the Secretary), and
                            ``(bb) not less than the allowable 
                        operating costs of inpatient hospital services 
                        (as defined in subsection (a)(4) for such 
                        hospital or unit in the base cost reporting 
                        period (including any payments made to such 
                        hospital or unit pursuant to paragraph (1)(A)), 
                        multiplied by the applicable percentage 
                        increase for such cost reporting period under 
                        subparagraph (B).
                    ``(II) Notwithstanding the provisions of clause 
                (i), in the case of a hospital or unit that is not 
                described in subclause (I), the hospital or unit's 
                target amount under such clause for a cost reporting 
                period shall be--
                            ``(aa) not less than the amount described 
                        in subclause (I)(aa), and
                            ``(bb) not greater than 110 percent of the 
                        national weighted average of all target amounts 
                        calculated under clause (i) for all hospitals 
                        and units described in such clause (as 
                        determined by the Secretary).''.
                    (B) Effective date.--The amendments made by 
                subparagraph (A) shall apply with respect to cost 
                reporting periods beginning on or after October 1, 
                1994.
            (3) Development of national prospective rates for 
        rehabilitation hospitals and distinct part units.--
                    (A) Development of proposal.--The Secretary of 
                Health and Human Services (hereafter in this section 
                referred to as the ``Secretary'') shall develop a 
                proposal to replace the current system under which 
                rehabilitation hospitals and rehabilitation units of a 
                hospital which are a distinct part of a hospital (as 
                described in section 1886(d)(1)(B) of the Social 
                Security Act (42 U.S.C. 1395ww(d)(1)(B))) receive 
                payment for the operating and capital-related costs of 
                inpatient hospital services under part A of title XVIII 
                of such Act with a prospective payment system. In 
                developing any proposal under this paragraph to replace 
                the current system with a prospective payment system, 
                the Secretary shall develop a system that provides 
                for--
                            (i) a payment on a per-discharge basis, and
                            (ii) an appropriate weighting of such 
                        payment amount as it relates to the 
                        classification of the discharge.
                    (B) Reports.--Not later than October 1, 1996, the 
                Secretary shall submit the proposal developed under 
                subparagraph (A) to the Congress.
    (b) Assignment of New Base Year for Certified Long-Stay Hospitals 
That Also Serve a Significant Proportion of Low-Income Patients.--
            (1) Rebasing for long-term hospitals.--
                    (A) In general.--Section 1886(b)(3) (42 U.S.C. 
                1395ww(b)(3)), as amended by subsection (a), is further 
                amended--
                            (i) in subparagraph (A), by striking ``(E), 
                        and (F)'' and inserting ``(E), (F), and (G)'';
                            (ii) in subparagraph (B)(ii), by striking 
                        ``(E), and (F)'' and inserting ``(E), (F), and 
                        (G)''; and
                            (iii) by inserting after subparagraph (F) 
                        the following new subparagraph:
                    ``(G)(i) For cost reporting periods beginning on or 
                after October 1, 1994, in the case of a hospital 
                described in subsection (d)(1)(B)(iv) that--
                            ``(I) has not received the additional 
                        payment amount described in paragraph (1)(A) 
                        for at least the preceding 2 consecutive 12-
                        month cost reporting periods; and
                            ``(II) for which the sum of the amounts 
                        described in subclauses (I) and (II) of 
                        subsection (d)(5)(F)(vi) during the period 
                        described in clause (I) exceeds 25 percent,
                the term `target amount' has the meaning given such 
                term by clause (ii).
                    ``(ii) In the case of a hospital described in 
                clause (i), the term `target amount' means--
                            ``(I) with respect to the first 12-month 
                        cost reporting period in which this 
                        subparagraph is applied to the hospital--
                                    ``(aa) the average allowable 
                                operating costs of inpatient hospital 
                                services (as defined in subsection 
                                (a)(4)) recognized under this title for 
                                the hospital during cost reporting 
                                periods of the hospital beginning 
                                during fiscal years 1990 and 1991 for 
                                such hospital (in this subparagraph 
                                referred to as the `base cost reporting 
                                period'), increased (in a compounded 
                                manner), by
                                    ``(bb) the applicable percentage 
                                increases applied to such hospital or 
                                under this paragraph for cost reporting 
                                periods after the base cost reporting 
                                period and up to and including such 
                                first 12-month cost reporting periods, 
                                or
                            ``(II) with respect to a subsequent 12-
                        month cost reporting period, the target amount 
                        for the preceding 12-month cost reporting 
                        period, increased by the applicable percentage 
                        increase under subparagraph (B).
                    ``(iii) Notwithstanding clause (ii)(II), if, after 
                2 consecutive 12-month cost reporting periods, a 
                hospital continues to be described in subclauses (I) 
                and (II) of clause (i), there shall be substituted for 
                the base cost reporting period described in clause 
                (ii)(I)(aa) the most recent preceding 2 12-month cost 
                reporting periods of the hospital for which data is 
                available (as determined by the Secretary), but only if 
                such substituting results in an increase in the target 
                amount for the hospital. The substitution under the 
                preceding sentence may not occur more often than every 
                2 years.
                    ``(iv) Effective October 1, 1994, the Secretary 
                shall take into account the enactment of this 
                subparagraph in making available to the hospital the 
                payments described in section 1815(e)(2), and, shall 
                increase such payments as if the target amount of the 
                hospital had been established pursuant to this 
                subparagraph as of such date.''.
            (2) Effective date.--The amendments made by this subsection 
        shall be effective with respect to cost reporting periods 
        beginning on or after October 1, 1994.

SEC. 615. MORATORIUM ON DESIGNATION OF NEW LONG-TERM HOSPITALS.

    Effective October 1, 1994, notwithstanding clause (iv) of section 
1886(d)(1)(B) of the Social Security Act (42 U.S.C. 1395ww(d)(1)(B)), a 
hospital which has an average inpatient length of stay (as determined 
by the Secretary of Health and Human Services) of greater than 25 days 
shall not be treated as a hospital described in such clause for 
purposes of such title unless such hospital was treated as a hospital 
described in such clause for purposes of such title as of the date of 
the enactment of this Act.

SEC. 616. EXTENSION OF FREEZE ON UPDATES TO ROUTINE SERVICE COST LIMITS 
              FOR SKILLED NURSING FACILITIES.

    (a) Payments Based on Cost Limits.--Section 1888(a) (42 U.S.C. 
1395yy(a)) is amended by striking ``112 percent'' each place it appears 
and inserting ``100 percent (adjusted by such amount as the Secretary 
determines to be necessary to preserve the savings resulting from the 
enactment of section 13503(a)(1) of the Omnibus Budget Reconciliation 
Act of 1993)''.
    (b) Adjustments to Limits.--Section 1888(c) (42 U.S.C. 1395yy(c)) 
is amended by inserting the following sentence at the end: ``The effect 
of the amendment made by section 616(a) of the Health Security Act 
shall not be considered by the Secretary in making adjustments pursuant 
to this subsection.''
    (c) Payments Determined on Prospective Basis.--Section 
1888(d)(2)(B) (42 U.S.C. 1395yy(d)(2)(B)) is amended by striking ``105 
percent'' and inserting ``100 percent (adjusted by such amount as the 
Secretary determines to be necessary to preserve the savings resulting 
from the enactment of section 13503(b) of the Omnibus Budget 
Reconciliation Act of 1993)''.
    (d) Effective Date.--The amendments made by subsections (a), (b), 
and (c) shall apply to cost reporting periods beginning on or after 
October 1, 1995.

SEC. 617. PAYMENTS FOR SOLE COMMUNITY HOSPITALS WITH TEACHING PROGRAMS 
              AND MULTIHOSPITAL CAMPUSES.

    (a) In General.--Section 1886(d)(5)(D) (42 U.S.C. 1395ww(d)(5)(D)) 
is amended by adding at the end the following new clause:
    ``(vi) The Secretary shall determine payment under clause (i) for a 
sole-community hospital that is a part of a multi-campus hospital by 
making the determination under such clause for each facility of the 
multi-campus hospital if any facility of the hospital would have a 
value of `r' greater than 0, as `r' is defined in subparagraph (B)(ii). 
In making a determination for each such facility, the Secretary shall 
determine the DRG-specific rate applicable to the facility based on its 
location in accordance with paragraph (3)(D).''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to discharges occurring on or after October 1, 1993, from multi-
campus hospitals that merged facilities on or after October 1, 1987.

SEC. 618. MEDICARE-DEPENDENT, SMALL RURAL HOSPITALS.

    (a) Clarification of Additional Payment.--Section 
1886(d)(5)(G)(ii)(I) (42 U.S.C. 1395ww(d)(5)(G)(ii)(I)) is amended by 
striking ``the first 3 12-month cost reporting periods that begin'' and 
inserting ``the 36-month period beginning with the first day of the 
cost reporting period that begins''.
    (b) Special Treatment Extended.--Section 1886(d)(5)(G) (42 U.S.C. 
1395ww(d)(5)(G)) is amended--
            (1) in clause (i), by striking ``October 1, 1994'' and 
        inserting ``October 1, 1999''; and
            (2) in clause (ii)(II), by striking ``October 1, 1994'' and 
        inserting ``October 1, 1999''.
    (c) Extension of Target Amount.--Section 1886(b)(3)(D) (42 U.S.C. 
1395ww(b)(3)(D)) is amended--
            (1) in the matter preceding clause (i), by striking ``March 
        31, 1993'' and inserting ``September 30, 1999''; and
            (2) by amending clause (iii) to read as follows:
            ``(iii) with respect to discharges occurring in fiscal 
        years 1994 through 1999, the target amount for the cost 
        reporting period beginning in the previous fiscal year 
        increased by the applicable percentage increase under 
        subparagraph (B)(iv).''.

SEC. 619. PROVISIONS RELATING TO RURAL HEALTH TRANSITION GRANT PROGRAM.

    (a) Eligibility of Rural Primary Care Hospitals for Grants.--
            (1) In general.--Section 4005(e)(2) of the Omnibus Budget 
        Reconciliation Act of 1987 is amended in the matter preceding 
        subparagraph (A) by inserting ``any rural primary care hospital 
        as defined in section 1861(mm)(1), or'' after ``means''.
            (2) Effective date.--The amendment made by paragraph (1) 
        shall apply to grants made on or after October 1, 1993.
    (b) Extension of Authorization of Appropriations.--Section 
4005(e)(9) of Omnibus Budget Reconciliation Act of 1987 is amended--
            (1) by striking ``1989 and'' and inserting ``1989,''; and
            (2) by striking ``1992'' and inserting ``1992 and 
        $30,000,000 for each of the fiscal years 1993 through 1999''.
    (c) Frequency of Required Reports.--Section 4008(e)(8)(B) of the 
Omnibus Budget Reconciliation Act of 1987 is amended by striking 
``every 6 months'' and inserting ``every 12 months''.

SEC. 620. LIMITED SERVICE HOSPITAL PROGRAM.

    (a) Limited Service Hospital Program.--Section 1820 (42 U.S.C. 
13951-4) is amended to read as follows:

                   ``limited service hospital program

    ``Sec. 1820. (a) Purpose.--The purpose of this section is to--
            ``(1) make available alternative hospital models to small 
        rural or isolated rural communities in which facilities are 
        relieved of the burden of selected regulatory requirements by 
        limiting the scope of inpatient acute services required to be 
        offered;
            ``(2) alter medicare reimbursement policy to support the 
        financial viability of alternative facilities by limiting the 
        financial risk faced by such small hospitals through the use of 
        reasonable cost reimbursement; and
            ``(3) promote linkages between facilities designated by the 
        State under this section and broader programs supporting the 
        development of and transition to integrated provider networks.
    ``(b) In General.--Any State that submits an application in 
accordance with subsection (c) may establish a limited hospital program 
described in subsection (d).
    ``(c) Application.--A State may establish a limited hospital 
program described in subsection (d) if the State submits to the 
Secretary at such time and in such form as the Secretary may require an 
application containing--
            ``(1) assurances that the State--
                    ``(A) has developed, or is in the process of 
                developing, a State rural health care plan that--
                            ``(i) in the case of a State applying to 
                        establish a rural primary care hospital program 
                        (described in subsection (d)(1)(A)), provides 
                        for the creation of one or more rural health 
                        networks (as defined in subsection (e)) in the 
                        State,
                            ``(ii) promotes regionalization of rural 
                        health services in the State, and
                            ``(iii) improves access to hospital and 
                        other health services for rural residents of 
                        the State;
                    ``(B) has developed the rural health care plan 
                described in subparagraph (A) in consultation with the 
                hospital association of the State, rural hospitals 
                located in the State, and the State Office of Rural 
                Health (or, in the case of a State in the process of 
                developing such plan, that assures the Secretary that 
                it will consult with its State hospital association, 
                rural hospitals located in the State, and the State 
                Office of Rural Health in developing such plan); and
            ``(2) assurances that the State has designated (consistent 
        with the rural health care plan described in paragraph (1)(A)), 
        or is in the process of designating, rural nonprofit or public 
        hospitals or facilities located in the State as rural primary 
        care hospitals facilities or medical assistance facilities; and
            ``(3) such other information and assurances as the 
        Secretary may require.
    ``(d) Limited Hospital Program Described.--
            ``(1) In general.--A State that has submitted an 
        application in accordance with subsection (c), may establish a 
        limited hospital program that includes--
                    ``(A) a rural primary care hospital program under 
                which--
                            ``(i) at least one facility in the State 
                        shall be designated as a rural primary care 
                        hospital in accordance with paragraph (2), and
                            ``(ii) the State shall develop at least one 
                        rural health network (as defined in subsection 
                        (e)) in the State;
                    ``(B) a medical assistance facility program under 
                which at least one facility in the State shall be 
                designated as a medical assistance facility in 
                accordance with paragraph (2); or
                    ``(C) both.
            ``(2) State designation of facilities.--A State may 
        designate one or more facilities as a rural primary care 
        hospital or medical assistance facility in accordance with 
        subparagraph (A) or (B).
                    ``(A) Criteria for designation as rural primary 
                care hospital.--A State may designate a facility as a 
                rural primary care hospital only if the facility--
                            ``(i) is located in a rural area (as 
                        defined in section 1886(d)(2)(D)), or is 
                        located in a county whose geographic area is 
                        substantially larger than the average 
                        geographic area for urban counties in the 
                        United States and whose hospital service area 
                        is characteristic of service areas of hospitals 
                        located in rural areas;
                            ``(ii) at the time such facility applies to 
                        the State for designation as a rural primary 
                        care hospital, is a hospital (or, in the case 
                        of a facility that closed during the 12-month 
                        period that ends on the date the facility 
                        applies for such designation, at the time the 
                        facility closed), with a participation 
                        agreement in effect under section 1866(a);
                            ``(iii) has in effect an agreement to 
                        participate with other hospitals and facilities 
                        in a rural health network;
                            ``(iv) provides 24-hour emergency services 
                        to ill or injured persons prior to admission to 
                        the facility or prior to their transportation 
                        to a full-service hospital;
                            ``(v) provides not more than 15 inpatient 
                        beds (meeting such conditions as the Secretary 
                        may establish) for providing acute inpatient 
                        care;
                            ``(vi) provides inpatient care for a period 
                        not to exceed an average length of 96 hours 
                        (unless a longer period is required because 
                        transfer to a hospital is precluded because of 
                        inclement weather or other emergency 
                        conditions);
                            ``(vii) meets such staffing requirements as 
                        would apply under section 1861(e), to a 
                        hospital located in a rural area, except that--
                                    ``(I) the facility need not meet 
                                hospital standards relating to the 
                                number of hours during a day, or days 
                                during a week, in which the facility 
                                must be open and fully staffed, except 
                                insofar as the facility is required to 
                                provide emergency care on a 24-hour 
                                basis under clause (v) and must have 
                                nursing services available on a 24-hour 
                                basis, but need not otherwise staff the 
                                facility except when an inpatient is 
                                present,
                                    ``(II) the facility may provide any 
                                services otherwise required to be 
                                provided by a full-time, onsite 
                                dietician, pharmacist, laboratory 
                                technician, medical technologist, and 
                                radiological technologist on a part-
                                time, offsite basis under arrangements 
                                as defined in section 1861(w)(1), and
                                    ``(III) the inpatient care 
                                described in clause (vii) may be 
                                provided by a physician's assistant, 
                                nurse practitioner, or clinical nurse 
                                specialist subject to the oversight of 
                                a physician who need not be present in 
                                the facility; and
                            ``(viii) meets the requirements of 
                        subparagraphs (C) through (I) of paragraph (2) 
                        of section 1861(aa), and of clauses (ii) and 
                        (iv) of the second sentence of that paragraph, 
                        except that in determining whether a facility 
                        meets the requirements of this subparagraph, 
                        subparagraphs (E) and (F) of that paragraph 
                        shall be applied as if any reference to 
                        `physician' is a reference to a physician as 
                        defined in section 1861(r)(1).
                    ``(B) Criteria for designation as medical 
                assistance facility.--A State may designate a facility 
                as a medical assistance facility only if the facility--
                            ``(i) is located in a county (or equivalent 
                        unit of local government)--
                                    ``(I) with fewer than 6 residents 
                                per square mile, or
                                    ``(II) in a rural area (as defined 
                                in section 1886(d)(2)(D)) that is 
                                located more than a 35-mile or 45-
                                minute drive from a hospital, a rural 
                                primary care hospital, or another 
                                facility described in this subsection;
                            ``(ii) at the time such facility applies to 
                        the State for designation as a medical 
                        assistance facility--
                                    ``(I) is a hospital (or in the case 
                                of a facility that closed during the 
                                12-month period that ends on the date 
                                the facility applies for such 
                                designation, at the time the facility 
                                closed), with a participation agreement 
                                in effect under section 1866(a); or
                                    ``(II) is licensed in accordance 
                                with applicable State and local laws 
                                and regulations;
                            ``(iii) meets the requirements of clauses 
                        (iv), (vi), and (vii) of subparagraph (A); and
                            ``(iv) meets the requirements of 
                        subparagraph (I) of paragraph (2) of section 
                        1861(aa).
    ``(e) Rural Health Network Defined.--For purposes of this section, 
the term `rural health network' means, with respect to a State, an 
organization--
            ``(1) consisting of--
                    ``(A) at least 1 facility that the State has 
                designated or plans to designate as a rural primary 
                care hospital, and
                    ``(B) at least 1 hospital that furnishes services 
                that a rural primary care hospital cannot furnish, and
            ``(2) the members of which have entered into agreements 
        regarding--
                    ``(A) patient referral and transfer,
                    ``(B) the development and use of communications 
                systems, including (where feasible) telemetry systems 
                and systems for electronic sharing of patient data,
                    ``(C) the provision of emergency and non-emergency 
                transportation among the members, and
                    ``(D) credentialing and quality assurance.
    ``(f) Certification by the Secretary.--The Secretary shall certify 
a facility as a rural primary care hospital or medical assistance 
facility (as the case may be) if the facility--
            ``(1) is located in a State that has established a limited 
        hospital program in accordance with subsection (d);
            ``(2) is designated as a rural primary care hospital or 
        medical assistance facility by the State in which it is 
        located; and
            ``(3) meets such other criteria as the Secretary may 
        require.
    ``(g) Permitting Maintenance of Swing Beds.--Nothing in this 
section shall be construed to prohibit a State from designating or the 
Secretary from certifying a facility as a rural primary care hospital 
or medical assistance facility solely because, at the time the facility 
applies to the State for designation as a rural primary care hospital 
or medical assistance facility, there is in effect an agreement between 
the facility and the Secretary under section 1883 under which the 
facility's inpatient hospital facilities are used for the furnishing of 
extended care services, except that the number of beds used for the 
furnishing of such services may not exceed the total number of licensed 
inpatient beds at the time the facility applies to the State for such 
designation (minus the number of inpatient beds used for providing 
inpatient care in a rural primary care facility pursuant to subsection 
(d)(2)(A)(vi)). The Secretary may establish additional conditions of 
participation for rural primary care hospitals with a substantial 
number of such beds. For purposes of the first sentence, the number of 
beds of the facility used for the furnishing of extended care services 
shall not include any beds of a unit of the facility that is licensed 
as a distinct-part skilled nursing facility at the time the facility 
applies to the State for designation as a rural primary care hospital 
or medical assistance facility.
    ``(h) Grants.--
            ``(1) Limited hospital program.--The Secretary may award 
        grants to States that have submitted applications in accordance 
        with subsection (c) for--
                    ``(A) engaging in activities relating to planning 
                and implementing a rural health care plan;
                    ``(B) in the case of a rural primary care hospital 
                program described in subsection (d)(1)(A), engaging in 
                activities relating to planning and implementing rural 
                health networks; and
                    ``(C) designation of facilities as rural primary 
                care hospitals or medical assistance facilities.
            ``(2) Rural emergency medical services.--
                    ``(A) In general.--The Secretary may award grants 
                to States that have submitted applications in 
                accordance with subparagraph (B) for the establishment 
                or expansion of a program for the provision of rural 
                emergency medical services.
                    ``(B) Application.--An application is in accordance 
                with this subparagraph if the State submits to the 
                Secretary at such time and in such form as the 
                Secretary may require an application containing the 
                assurances described in subparagraphs (A)(ii), 
                (A)(iii), and (B) of subsection (c)(1) and paragraph 
                (3) of such subsection.
    ``(i) Study on Clinically Based Alternative to 96-Hour Rule.--The 
Secretary shall conduct a study on the feasibility of admitting 
patients to rural primary care hospitals and medical assistance 
facilities on a limited DRG basis instead of using the 96-hour average 
length of stay criteria described in subsection (d)(2)(A)(vii).
    ``(j) Waiver of Conflicting Part A Provisions.--The Secretary is 
authorized to waive such provisions of this part and part C as are 
necessary to conduct the program established under this section.
    ``(k) Authorization of Appropriations.--There are authorized to be 
appropriated from the Federal Hospital Insurance Trust Fund--
            ``(1) for making grants under subsection (h)(1) to States 
        that have established a rural primary care hospital program in 
        the State under subsection (d)(1)(A), $15,000,000 for each of 
        fiscal years 1993 through 1995; and
            ``(2) for making grants to all States under subsection (h), 
        $25,000,000 in each of the fiscal years 1996 through 1999.''.
    (b) Part A Amendments Relating to Rural Primary Care Hospitals and 
Medical Assistance Facilities.--
            (1) Definitions.--Section 1861 (42 U.S.C. 1395x) is amended 
        by adding at the end the following new subsection:

  ``medical assistance facility; medical assistance facility services

    ``(oo)(1) The term `medical assistance facility' means a facility 
certified by the Secretary as a medical assistance facility under 
section 1820(f).
    ``(2) The term `medical assistance facility services' means items 
and services, furnished to an inpatient for a medical assistance 
facility by such facility, that would be inpatient hospital services if 
furnished to an inpatient of a hospital by a hospital.''.
            (2) Coverage and payment.--(A)(i) Section 1812(a)(1) (42 
        U.S.C. 1395d(a)(1)) is amended by striking ``inpatient hospital 
        services'' the first place it appears and inserting ``, 
        inpatient hospital services and inpatient medical assistance 
        facility services''; and
            (ii) by striking ``inpatient hospital services'' the second 
        place it appears and inserting ``such services''.
            (B) Section 1814 (42 U.S.C. 1395f) is amended--
                    (i) in subsection (b), by striking ``inpatient 
                rural primary care hospital services,'' and inserting 
                ``inpatient rural primary care hospital services, other 
                than a medical assistance facility providing inpatient 
                medical assistance facility services,''; and
                    (ii) by amending subsection (l) to read as follows:
    ``(l) Payment for Inpatient Rural Primary Care Services and 
Inpatient Medical Assistance Facility Services.--The amount of payment 
under this part for inpatient rural primary care services and inpatient 
medical assistance facility services is the reasonable costs of the 
rural primary care hospital or medical assistance facility in providing 
such services.''.
            (3) Treatment of medical assistance facilities as providers 
        of services.--(A) Section 1861(u) (42 U.S.C. 1395x(u)) is 
        amended by inserting ``medical assistance facility,''after 
        ``rural primary care hospital,''.
            (B) The first sentence of section 1864(a) (42 U.S.C. 
        1395aa(a)) is amended by inserting ``a medical assistance 
        facility, as defined in section 1861(oo)(1),'' after 
        ``1861(mm)(1),''.
            (C) The third sentence of section 1865(a) of such Act (42 
        U.S.C. 1395bb(a)) is amended by striking ``or 1861(mm)(1)'' and 
        inserting ``1861(mm)(1), or 1861(oo)(1),''.
            (4) Conforming amendments.--(A) Section 1128A(b)(1) (42 
        U.S.C. 1320a-7a(b)(1)) is amended--
                    (i) by striking ``or a rural primary care 
                hospital'' the first place it appears and inserting ``, 
                a rural primary care hospital, or a medical assistance 
                facility''; and
                    (ii) by striking ``or a rural primary care 
                hospital'' the second place it appears and inserting 
                ``, the rural primary care hospital, or the medical 
                assistance facility''.
            (B) Section 1128B(c) (42 U.S.C. 1320a-7b(c)) is amended by 
        inserting ``medical assistance facility,'' after ``rural 
        primary care hospital,''.
            (C) Section 1134 (42 U.S.C. 1320b-4) is amended by striking 
        ``or rural primary care hospitals'' each place it appears and 
        inserting ``, rural primary care hospitals, or medical 
        assistance facilities''.
            (D) Section 1138(a)(1) (42 U.S.C. 1320b-8(a)(1)) is 
        amended--
                    (i) in the matter preceding subparagraph (A), by 
                striking ``or rural primary care hospital'' and 
                inserting ``, rural primary care hospital, or medical 
                assistance facility'', and
                    (ii) in the matter preceding clause (i) of 
                subparagraph (A), by striking ``or rural primary care 
                hospital'' and inserting ``, rural primary care 
                hospital, or medical assistance facility''.
            (E) Section 1164(e) (42 U.S.C. 1320c-13(e)) is amended by 
        inserting ``medical assistance facilities,'' after ``rural 
        primary care hospitals,''.
            (F) Section 1816(c)(2)(C) (42 U.S.C. 1395h(c)(2)(C)) is 
        amended by inserting ``medical assistance facility,'' after 
        ``rural primary care hospital,''.
            (G) Section 1833 (42 U.S.C. 1395l) is amended--
                    (i) in subsection (h)(5)(A)(iii)--
                            (I) by striking ``or rural primary care 
                        hospital'' and inserting ``rural primary care 
                        hospital, or medical assistance facility''; and
                            (II) by striking ``to the hospital'' and 
                        inserting ``to the hospital or the facility'';
                    (ii) in subsection (i)(1)(A), by inserting 
                ``medical assistance facility,'' after ``rural primary 
                care hospital,'';
                    (iii) in subsection (i)(3)(A), by striking ``or 
                rural primary care hospital services'' and inserting 
                ``rural primary care hospital services, or medical 
                assistance facility services'';
                    (iv) in subsection (l)(5)(A), by inserting 
                ``medical assistance facility,'' after ``rural primary 
                care hospital,'' each place it appears; and
                    (v) in subsection (l)(5)(C), by striking ``or rural 
                primary care hospital'' each place it appears and 
                inserting ``, rural primary care hospital, or medical 
                assistance facility''.
            (H) Section 1835(c) (42 U.S.C. 1395n(c)) is amended by 
        adding at the end the following: ``A medical assistance 
        facility shall be considered a hospital for purposes of this 
        subsection.''.
            (I) Section 1842(b)(6)(A)(ii) (42 U.S.C. 
        1395u(b)(6)(A)(ii)) is amended by inserting ``medical 
        assistance facility,'' after ``rural primary care hospital,''.
            (J) Section 1861 (42 U.S.C. 1395x) is amended--
                    (i) in the last sentence of subsection (e), by 
                striking ``1861(mm)(1))'' and inserting ``1861(mm)(1)) 
                or a medical assistance facility (as defined in section 
                1861(oo)(1)).'',
                    (ii) in subsection (w)(1) by inserting ``medical 
                assistance facility,'' after ``rural primary care 
                hospital,'', and
                    (iii) in subsection (w)(2), by striking ``or rural 
                primary care hospital'' each place it appears and 
                inserting ``, rural primary care hospital, or medical 
                assistance facility''.
            (K) Section 1862(a)(14) (42 U.S.C. 1395y(a)(14)) is amended 
        by striking ``or rural primary care hospital'' each place it 
        appears and inserting ``, rural primary care hospital, or 
        medical assistance facility''.
            (L) Section 1866(a)(1) (42 U.S.C 1395cc(a)(1)) is amended--
                    (i) in subparagraph (F)(ii), by inserting ``medical 
                assistance facilities,'' after ``rural primary care 
                hospitals,'';
                    (ii) in subparagraph (H)--
                            (I) in the matter preceding clause (i), by 
                        inserting ``and in the case of medical 
                        assistance facilities which provide inpatient 
                        medical assistance facility services'' after 
                        ``rural primary care hospital services''; and
                            (II) in clauses (i) and (ii), by striking 
                        ``hospital'' each place it appears and 
                        inserting ``hospital or facility'';
                    (iii) in subparagraph (I)--
                            (I) in the matter preceding clause (i), by 
                        striking ``or rural primary care hospital'' and 
                        inserting ``, a rural primary care hospital, or 
                        a medical assistance facility''; and
                            (II) in clause (ii), by striking ``the 
                        hospital'' and inserting ``the hospital or the 
                        facility''; and
                    (iv) in subparagraph (N)--
                            (I) in the matter preceding clause (i), by 
                        striking ``and rural primary hospitals'' and 
                        inserting ``, rural primary care hospitals, and 
                        medical assistance facilities'';
                            (II) in clause (i), by striking ``or rural 
                        primary care hospital,'' and inserting ``, 
                        rural primary care hospital, or medical 
                        assistance facility,''; and
                            (III) in clause (ii), by striking 
                        ``hospital'' and inserting ``hospital or 
                        facility''.
            (M) Section 1866(a)(3) (42 U.S.C 1395cc(a)(3)) is amended--
                    (i) by striking ``rural primary care hospital,'' 
                each place it appears in subparagraphs (A) and (B) and 
                inserting ``rural primary care hospital, medical 
                assistance facility,'', and
                    (ii) in subparagraph (C)(ii)(II), by striking 
                ``rural primary care hospitals,'' each place it appears 
                and inserting ``rural primary care hospitals, medical 
                assistance facilities''.
            (N) Section 1867(e)(5) (42 U.S.C. 1395dd(e)(5)) is amended 
        by striking ``1861(mm)(1))'' and inserting ``1861(mm)(1)) or a 
        medical assistance facility (as defined in section 
        1861(oo)(1)).''.
    (c) Part B Amendments Relating to Rural Primary Care Hospitals and 
Medical Assistance Facilities.--
            (1) Coverage.--(A) Section 1861(oo) (42 U.S.C. 1395x(oo)) 
        as added by subsection (b)(1), is amended by adding at the end 
        the following new paragraph:
    ``(3) The term `outpatient medical assistance facility services' 
means medical and other health services furnished by a medical 
assistance facility on an outpatient basis.''.
            (B) Section 1832(a)(2) (42 U.S.C. 1395k(a)(2)) is amended--
                    (i) in subparagraph (I), by striking ``and'' at the 
                end;
                    (ii) in subparagraph (J), by striking the period at 
                the end and inserting ``; and''; and
                    (iii) by adding at the end the following new 
                subparagraph:
                    ``(K) outpatient medical assistance facility 
                services (as defined in section 1861(oo)(3)).''.
            (2) Payment.--(A) Section 1833(a) (42 U.S.C. 1395l(a)) is 
        amended--
                    (i) in paragraph (2), in the matter preceding 
                subparagraph (A), by striking ``and (I)'' and inserting 
                ``(I), and (K)'';
                    (ii) in paragraph (6), by striking ``and'' at the 
                end;
                    (iii) in paragraph (7), by striking the period at 
                the end and inserting ``; and''; and
                    (iv) by adding at the end the following new 
                paragraph:
            ``(8) in the case of outpatient medical assistance facility 
        services, the amounts described in section 1834(g).''.
            (B) Section 1834(g) (42 U.S.C. 1395m(g)) is amended--
                    (i) in the subsection heading by inserting ``and 
                Outpatient Medical Assistance Facility Services'' after 
                ``Services'';
                    (ii) in paragraph (1), by striking ``provided 
                during a year before 1993 in a rural primary care 
                hospital under this part shall be determined by one of 
                the following methods as elected by the rural primary 
                care hospital'' and inserting ``in a rural primary care 
                hospital or medical assistance facility under this part 
                shall be determined by one of the following methods as 
                elected by the rural primary care hospital or medical 
                assistance facility'';
                    (iii) in paragraph (1)(A)(ii), by striking 
                ``outpatient rural primary care hospital services'' 
                each place it appears and inserting ``outpatient rural 
                primary care hospital services or outpatient medical 
                assistance facility services''; and
                    (iv) in paragraph (1)(B), by striking ``hospital'' 
                and inserting ``hospital or facility''.
    (d) Payment Continued to Designated EACHs.--
            (1) Termination of each designation.--Section 1820(i)(1)(A) 
        (42 U.S.C. 1395l(4)(i)(1)(A)) is amended by inserting at the 
        end the following new flush sentence:
        ``The Secretary shall not designate any hospital as an 
        essential access community hospital on or after July 1, 
        1994.''.
            (2) Permitting payment to prior designated eachs.--Section 
        1886(d)(5)(D) (42 U.S.C. 1395ww(d)(5)(D)) is amended--
                    (A) in clause (iii)(III), by inserting ``as such 
                section was in effect as of July 1, 1994'' before the 
                period at the end; and
                    (B) in clause (v), by inserting ``as such section 
                was in effect as of July 1, 1994'' after 
                ``1820(i)(1).''
            (3) Effective date.--The amendments made by this subsection 
        shall take effect on July 1, 1994.
    (e) Technical Amendment Relating to Part A Deductible, Coinsurance 
and Spell of Illness.--(1) Section 1812(a)(1) (42 U.S.C. 1395d(a)(1)), 
as amended by subsection (b)(2)(A), is amended--
            (A) by striking ``inpatient medical assistance facility 
        services'' and inserting ``inpatient medical assistance 
        facility services, inpatient rural primary care hospital 
        services, or inpatient medical assistance facility services''; 
        and
            (B) by striking ``and inpatient rural primary care hospital 
        services''.
    (2) Sections 1813(a) and 1813(b)(3)(A) (42 U.S.C. 1395e(a), 
1395e(b)(3)(A)) are each amended by striking ``inpatient hospital 
services'' each place it appears and inserting ``inpatient hospital 
services, inpatient rural primary care hospital services, or inpatient 
medical assistance facility services,''.
    (3) Section 1813(b)(3)(B) (42 U.S.C. 1395e(b)(3)(B)) is amended by 
striking ``inpatient hospital services'' and inserting ``inpatient 
hospital services, inpatient rural primary care hospital services, 
inpatient medical assistance facility services,''.
    (4) Section 1861(a) (42 U.S.C. 1395x(a)) is amended--
            (A) in paragraph (1), by striking ``inpatient hospital 
        services'' and inserting ``inpatient hospital services, 
        inpatient rural primary care hospital services, inpatient 
        medical assistance facility services,''; and
            (B) in paragraph (2), by striking ``hospital'' and 
        inserting ``hospital, rural primary care hospital, or medical 
        assistance facility''.
    (f) Repeal of Development of PPS System For Inpatient Rural Primary 
Care Hospital Services.--
            (1) In general.--Section 1814(l) (42 U.S.C. 1395f(l)) is 
        amended by striking paragraph (2).
            (2) Conforming amendments.--Section 1814(l)(1) (42 U.S.C. 
        1395F(l)(1)) is amended--
                    (A) by striking ``(l)(1)'' and inserting ``(l)'';
                    (B) by redesignating subparagraphs (A) and (B) as 
                paragraphs (1) and (2), respectively;
                    (C) in paragraph (2), as redesignated, by striking 
                ``paragraph'' and inserting ``subsection''; and
                    (D) in the last sentence, by striking ``paragraph'' 
                and inserting ``subsection''.
    (g) Repeal of Development and Implementation of All Inclusive PPS 
System for Outpatient Rural Primary Care Services.--
            (1) In general.--Section 1834(g) (42 U.S.C. 1395m(g)), as 
        amended by subsection (c)(2)(B), is amended by striking 
        paragraph (2).
            (2) Conforming amendments.--Section 1834(g)(1) (42 U.S.C. 
        1395m(g)(1)) is amended--
                    (A) by striking ``(1) In general.--''
                    (B) by redesignating subparagraph (A) and clauses 
                (i) and (ii) of such subparagraph as paragraph (1) and 
                subparagraphs (A) and (B) of such paragraph, 
                respectively;
                    (C) by redesignating subparagraph (B) as paragraph 
                (2);
                    (D) in paragraph (1)(A), as redesignated, by 
                striking ``subparagraph (B)''; and
                    (E) in paragraph (1)(B), as so redesignated, by 
                striking ``subparagraph'' and inserting ``paragraph''.
    (h) Effective Date.--Except as otherwise provided, the amendments 
made by this section shall apply to services furnished on or after 
October 1, 1994.

SEC. 621. TERMINATION OF INDIRECT MEDICAL EDUCATION PAYMENTS.

    (a) In General.--Section 1886(d)(5)(B) (42 U.S.C. 1395ww(d)(5)(B)) 
is amended in the matter preceding clause (i) by striking ``The 
Secretary'' and inserting ``For discharges occurring before January 1, 
1996, the Secretary''.
    (b) Adjustment to Standardized Amounts.--Section 1886(d)(2)(C)(i) 
(42 U.S.C. 1395ww(d)(2)(C)(i)) is amended by striking ``excluding'' and 
inserting ``for discharges occurring before January 1, 1996, 
excluding''.

SEC. 622. SUBACUTE CARE STUDY.

    (a) Study.--The Secretary of Health and Human Services (hereafter 
in this section referred to as the ``Secretary'') shall--
            (1) define the level and type of care that should 
        constitute subacute care;
            (2) determine the appropriateness of furnishing subacute 
        care in different settings by evaluating the quality of care 
        and patient outcomes;
            (3) determine the cost and effectiveness of providing 
        subacute care under the medicare program under title XVIII of 
        such Act to individuals who are eligible for benefits under 
        part A of such title;
            (4) determine the extent to which hospital DRG prospective 
        payment rates under section 1886(d) of such Act (42 U.S.C. 
        1395ww(d)) are appropriate for the less restrictive 
        institutional settings that provide subacute care; and
            (5) study the relationships between institutions and their 
        payment methodologies in order to develop ways in which to 
        maximize the continuity of care for each patient episode in 
        which subacute care is furnished.
    (b) Report.--Not later than October 1, 1996, the Secretary shall 
submit to the Congress a report on the matters studied under subsection 
(a).

                PART III--PROVISIONS RELATING TO PART B

SEC. 631. UPDATES FOR PHYSICIANS' SERVICES.

    Section 1848(d)(1) (42 U.S.C. 1395w-4(d)(1)) is amended--
            (1) in subparagraph (A), by inserting after ``subparagraph 
        (B)'' the following: ``and, in the case of 1995, specified in 
        subparagraph (C)'';
            (2) by redesignating subparagraph (C) as subparagraph (D); 
        and
            (3) by inserting after subparagraph (B) the following new 
        subparagraph:
                    ``(C) Special provision for 1995.--For purposes of 
                subparagraph (A), the conversion factor specified in 
                this subparagraph for 1995 is--
                            ``(i) in the case of physicians' services 
                        included in the category of primary care 
                        services (as defined for purposes of subsection 
                        (j)(1)), the conversion factor established 
                        under this subsection for 1994 reduced by 1 
                        percent and adjusted by the update established 
                        under paragraph (3) for 1995; and
                            ``(ii) in the case of any other physicians' 
                        services, the conversion factor established 
                        under this subsection for 1994 reduced by 4.0 
                        percent and adjusted by the update established 
                        under paragraph (3) for 1995.''.

SEC. 632. SUBSTITUTION OF REAL GDP TO ADJUST FOR VOLUME AND INTENSITY; 
              REPEAL OF RESTRICTION ON MAXIMUM REDUCTION PERMITTED IN 
              DEFAULT UPDATE.

    (a) Use of Real GDP To Adjust for Volume and Intensity.--Section 
1848(f)(2)(A)(iii) (42 U.S.C. 1395w-4(f)(2)(A)(iii)) is amended to read 
as follows:
                            ``(iii) 1 plus the average per capita 
                        growth in the real gross domestic product 
                        (divided by 100) for the 5-fiscal-year period 
                        ending with the previous fiscal year (increased 
                        by 1.5 percentage points for the category of 
                        services consisting of primary care services), 
                        and''.
    (b) Repeal of Restriction on Maximum Reduction.--Section 
1848(d)(3)(B)(ii) (42 U.S.C. 1395w-4(d)(3)(B)(ii)) is amended--
            (1) in the heading, by inserting ``in certain years'' after 
        ``adjustment'';
            (2) in the matter preceding subclause (I), by striking 
        ``for a year'';
            (3) in subclause (I), by adding ``and'' at the end;
            (4) in subclause (II), by striking ``, and'' and inserting 
        a period; and
            (5) by striking subclause (III).
    (c) Repeal of Performance Standard Factor.--
            (1) In general.--Section 1848(f)(2) is amended by striking 
        subparagraph (B) and redesignating subparagraph (C) as 
        subparagraph (B).
            (2) Conforming amendment.--Section 1848(f)(2)(A) is amended 
        in the matter following clause (iv) by striking ``1, multiplied 
        by 100'' and all that follows through ``subparagraph (B))'' and 
        inserting ``1 and multiplied by 100''.
    (d) Effective Date.--
            (1) Volume performance standards.--The amendments made by 
        subsections (a) and (c) shall apply with respect to volume 
        performance standards established beginning with fiscal year 
        1995.
            (2) Repeal of restriction on maximum reduction.--The 
        amendments made by subsection (b) shall apply to services 
        furnished on or after January 1, 1997.

SEC. 633. PAYMENT FOR PHYSICIANS' SERVICES RELATING TO INPATIENT STAYS 
              IN CERTAIN HOSPITALS.

    (a) In General.--
            (1) Limitations described.--Part B of title XVIII (42 
        U.S.C. 1831 et seq.) is amended by inserting after section 1848 
        the following new section:

``limitations on payment for physicians' services relating to inpatient 
                       stays in certain hospitals

    ``Sec. 1849. (a) Definitions.--In this section, the following 
definitions apply:
            ``(1) Hospital.--The term `hospital' means a subsection (d) 
        hospital as defined in section 1886(d)(1)(B).
            ``(2) 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.
            ``(3) Rural area; urban area.--The terms `rural area' and 
        `urban area' have the meaning given such terms under section 
        1886(d)(2)(D).
            ``(4) Teaching hospital.--The term `teaching hospital' 
        means a hospital which has a teaching program approved as 
        specified in section 1861(b)(6).
    ``(b) 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 (c)(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 (c)(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 (d)) 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 of such hospital under paragraph (1).
    ``(c) 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 per admission 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 adjusted for variations in case-mix, 
                        disproportionate share status, and teaching 
                        status among hospitals (as determined by the 
                        Secretary under subparagraph (C)); 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 
                        calendar 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.
    ``(d) 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 (b) during a year shall be reduced by 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 (b)(1) that the hospital medical staff's projected relative 
value per admission exceeds the allowable average per admission 
relative value.
    ``(e) 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 relative value 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 (c)(2)(C)).
            ``(2) Reconciliation with reductions taken.--
                    ``(A) Reimbursement.--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--
                            ``(i) 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 (c)(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 (d), including interest 
                        at an appropriate rate determined by the 
                        Secretary; and
                            ``(ii) 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)) exceeded the 
                        allowable average per admission relative value 
                        applicable to the hospital's medical staff 
                        under subsection (c)(1) for the year, the 
                        Secretary shall reimburse the fiduciary agent 
                        for the medical staff, as a percent of the 
                        total amount of payment otherwise determined 
                        under this part for physicians' services 
                        furnished during the year to inpatients of the 
                        hospital by the hospital's medical staff (prior 
                        to the reduction under subsection (d)), the 
                        difference between 15 percentage points and the 
                        actual number of percentage points that the 
                        medical staff exceeded the allowable average 
                        per admission relative value, including 
                        interest at any appropriate rate determined by 
                        the Secretary.
                    ``(B) No reimbursement.--The Secretary shall not 
                pay the fiduciary agent for the medical staff of a 
                hospital any amounts by which payments for physicians' 
                services provided by the medical staff were reduced for 
                a year under this section 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)) exceeded the allowable average per 
                admission relative value applicable to the hospital's 
                medical staff under subsection (c)(1) for the year by 
                15 percentage points or more.
            ``(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 1 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 amounts withheld 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)(A)(ii) 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.
    ``(f) Claims To Be Submitted Not Later Than 90 Days After End of 
Year.--Notwithstanding any other provision of law, no payment may be 
made under this part for any physician's service furnished by a member 
of the medical staff of a hospital to an inpatient of the hospital 
during a year unless the hospital submits a claim to the Secretary for 
the payment for such service not later than 90 days after the last day 
of the year.''.
            (2) Conforming amendments.--(A) Section 1833(a)(1)(N) (42 
        U.S.C. 1395l(a)(1)(N)) is amended by inserting ``(subject to 
        reduction under section 1849)'' after ``1848(a)(1)''.
            (B) Section 1848(a)(1)(B) (42 U.S.C. 1395w-4(a)(1)(B)) is 
        amended by striking ``this subsection,'' and inserting ``this 
        subsection and section 1849,''.
    (b) Requiring Physicians To Identify Hospital at Which Service 
Furnished.--Section 1848(g)(4)(A)(i) (42 U.S.C. 1395w-4(g)(4)(A)(i)) is 
amended by striking ``beneficiary,'' and inserting ``beneficiary (and, 
in the case of a service furnished to an inpatient of a hospital, 
report the hospital identification number on such claim form),''.
    (c) Effective Date.--The amendments made by this section shall 
apply to services furnished on or after January 1, 1998.

SEC. 634. CHANGES IN UNDERSERVED AREA BONUS PAYMENTS.

    (a) In General.--Section 1833(m) (42 U.S.C. 1395l(m)) is amended--
            (1) by inserting ``(1)'' after ``(m)'',
            (2) by inserting ``described in paragraph (2)'' after 
        ``physicians' services'',
            (3) by striking ``10 percent'' and inserting ``the 
        applicable percent'',
            (4) by striking ``service'' the last place it appears and 
        inserting ``services'', and
            (5) by adding at the end the following new paragraph:
    ``(2)(A) The applicable percent referred to in paragraph (1) is 20 
percent in the case of primary care services, as defined in section 
1842(i)(4), and 10 percent for services other than primary care 
services furnished in health professional shortage areas located in 
rural areas as defined in section 1886(d)(2)(D).
    ``(B) The Secretary shall reduce payments for all services (other 
than primary care services) for which payment may be made under this 
section by such percentage as the Secretary determines necessary so 
that, beginning on the date of the enactment of the Health Security 
Act, the amendments made by section 634(a) of such Act would not result 
in expenditures under this section that exceed the amount of such 
expenditures that would have been made if such amendment had not been 
made.''.
    (b) Effective Date.--The amendments made by subsection (a) are 
effective for services furnished on or after January 1, 1995.

SEC. 635. DEVELOPMENT AND IMPLEMENTATION OF RESOURCE-BASED METHODOLOGY 
              FOR PRACTICE EXPENSES.

    (a) Development.--
            (1) In general.--The Secretary of Health and Human Services 
        shall develop a methodology for implementing in 1997 a 
        resource-based system for determining practice expense relative 
        value units for each physician's service. The methodology 
        utilized shall recognize the staff, equipment, and supplies 
        used in the provision of various medical and surgical services 
        in various settings.
            (2) Report.--The Secretary shall transmit a report by 
        January 1, 1996, on the methodology developed under paragraph 
        (1) to the Committee on Ways and Means and the Committee on 
        Energy and Commerce of the House of Representatives and the 
        Committee on Finance of the Senate. The report shall include a 
        presentation of data utilized in developing the methodology and 
        an explanation of the methodology.
    (b) Implementation.--
            (1) In general.--Section 1848(c)(2)(C)(ii) (42 U.S.C. 
        1395w-4(c)(2)(C)(ii)) is amended--
                    (A) by inserting ``for the service for years before 
                1997'' before ``equal to'',
                    (B) by striking the period at the end of subclause 
                (II) and inserting a comma, and
                    (C) by adding after and below subclause (II) the 
                following:
                        ``and for years beginning with 1997 based on 
                        the relative practice expense resources 
                        involved in furnishing the service.''.
            (2) Conforming amendment.--Section 1848(c)(3)(C)(ii) (42 
        U.S.C. 1395w-4(c)(3)(C)(ii)) is amended by striking ``The 
        practice'' and inserting ``For years before 1997, the 
        practice''.
            (3) Application of certain provisions.--In implementing the 
        amendment made by paragraph (1)(C), the provisions of clauses 
        (ii)(II) and (iii) of section 1848(c)(2)(B) of the Social 
        Security Act shall apply in the same manner as they apply to 
        adjustments under clause (ii)(I) of such section.

SEC. 636. DEMONSTRATION PROJECTS FOR MEDICARE STATE-BASED PERFORMANCE 
              STANDARD RATE OF INCREASE.

    Section 1848(f) (42 U.S.C. 1395w-4(f)) is amended by adding at the 
end the following new paragraph:
            ``(6) State-based performance standard rates of increase 
        demonstration projects.--The Secretary shall establish 
        demonstration projects in not more than 3 States under which a 
        State elects State-based performance standard rates of increase 
        to substitute for the national performance standard rates of 
        increase established for the year under paragraph (2). The 
        Secretary shall develop criteria for the establishment of such 
        demonstration projects which shall include the requirement of 
        budget-neutrality for payments made under this part with 
        respect to physicians' services furnished in a State 
        participating in the demonstration project.''.

SEC. 637. ELIMINATION OF FORMULA-DRIVEN OVERPAYMENTS FOR CERTAIN 
              OUTPATIENT HOSPITAL SERVICES.

    (a) Ambulatory Surgical Center Procedures.--Section 
1833(i)(3)(B)(i)(II) (42 U.S.C. 1395l(i)(3)(B)(i)(II)) is amended--
            (1) by striking ``of 80 percent''; and
            (2) by striking the period at the end and inserting the 
        following: ``, less the amount a provider may charge as 
        described in clause (ii) of section 1866(a)(2)(A).''.
    (b) Radiology Services and Diagnostic Procedures.--Section 
1833(n)(1)(B)(i)(II) (42 U.S.C. 1395l(n)(1)(B)(i)(II)) is amended--
            (1) by striking ``of 80 percent''; and
            (2) by striking the period at the end and inserting the 
        following: ``, less the amount a provider may charge as 
        described in clause (ii) of section 1866(a)(2)(A).''.
    (c) Effective Date.--The amendments made by this section shall 
apply to services furnished during portions of cost reporting periods 
occurring on or after January 1, 1995.

SEC. 638. EYE OR EYE AND EAR HOSPITALS.

    Section 1833(i)(4)(A) (42 U.S.C. 1395l(i)(4)(A)) is amended in the 
matter following clause (iii) by striking ``January 1, 1995'' and 
inserting ``September 30, 1997''.

SEC. 639. IMPOSITION OF COINSURANCE ON LABORATORY SERVICES.

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

SEC. 640. APPLICATION OF COMPETITIVE ACQUISITION PROCESS FOR PART B 
              ITEMS AND SERVICES.

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

            ``competition acquisition for items and services

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

SEC. 641. APPLICATION OF COMPETITIVE ACQUISITION PROCEDURES FOR 
              LABORATORY SERVICES.

    (a) In General.--Section 1847(c), as added by section 640, is 
amended by inserting after paragraph (2) the following new paragraph:
            ``(3) Clinical diagnostic laboratory tests.''.
    (b) Reduction in Fee Schedule Amounts if Competitive Acquisition 
Fails To Achieve Savings.--Section 1833(h) (42 U.S.C. 1395l(h)) is 
amended by adding at the end the following new paragraph:
    ``(7) Notwithstanding any other provision of this subsection, if 
the Secretary applies the authority provided under section 1847 to 
establish competitive acquisition areas for the furnishing of clinical 
diagnostic laboratory tests in a year and the application of such 
authority does not result in a reduction of at least 10 percent in the 
projected payment amount that would have applied to such tests under 
this section if the tests had not been furnished through competitive 
acquisition under section 1847, the Secretary shall reduce each payment 
amount otherwise determined under the fee schedules and negotiated 
rates established under this subsection by such percentage as the 
Secretary determines necessary to result in such a reduction.''.

SEC. 642. EXPANDED COVERAGE FOR PHYSICIAN ASSISTANTS AND NURSE 
              PRACTITIONERS.

    (a) Coverage in Outpatient Settings.--Section 1861(s)(2)(K) (42 
U.S.C. 1395x(s)(2)(K)) is amended--
            (1) in clause (i)--
                    (A) by striking ``or'' at the end of subclause 
                (II); and
                    (B) by inserting ``or (IV) in an outpatient setting 
                as defined by the Secretary'' following ``shortage 
                area,''; and
            (2) in clause (ii), by striking ``section 1919(a)'' and 
        inserting ``section 1919(a) or in an outpatient setting as 
        defined by the Secretary''.
    (b) Payment Based on Physician Fee Schedule.--
            (1) Section 1833(a)(1)(O) (42 U.S.C. 1395l(a)(1)(O)) is 
        amended--
                    (A) by striking ``section 1861(s)(2)(K)(iii) 
                (relating to nurse practitioner and clinical nurse 
                specialist services provided in a rural area)'' and 
                inserting ``section 1861(s)(2)(K)'';
                    (B) by striking ``for services furnished on or 
                after January 1, 1992,'' and inserting ``for services 
                described in section 1861(s)(2)(K)(iii) furnished on or 
                after January 1, 1992, and for services described in 
                clauses (i), (ii), and (iv) of section 1861(s)(2)(K) 
                furnished on or after January 1, 1997,''; and
                    (C) by striking ``subsection (r)(2)'' and inserting 
                ``subsection (r)(2) or subparagraph (A) or (B) of 
                section 1842(b)(12)''.
            (2) Section 1842(b)(12)(A) (42 U.S.C. 1395u(b)(12)(A)) is 
        amended--
                    (A) by striking ``and'' at the end of clause (i);
                    (B) in clause (ii) in the matter preceding 
                subclause (I), by striking ``the prevailing'' and 
                inserting ``for services furnished before January 1, 
                1997, the prevailing'';
                    (C) by striking the period at the end of clause 
                (ii)(II) and inserting ``; and''; and



                    (D) by inserting at the end the following clause:
                            ``(iii) in the case of services furnished 
                        on or after January 1, 1997, the fee schedule 
                        amount shall be equal to--
                                    ``(I) in the case of services 
                                performed as an assistant at surgery, 
                                65 percent of the amount that would 
                                otherwise be recognized if performed by 
                                a physician who is serving as an 
                                assistance at surgery,
                                    ``(II) in the case of services 
                                performed (other than as an assistant 
                                at surgery) in a hospital, 75 percent 
                                of the fee schedule amount specified 
                                under section 1848, and
                                    ``(III) in the case of other 
                                services, 85 percent of the fee 
                                schedule amount specified under section 
                                1848.
    (c) Rural Nurse Practitioners as Assistants at Surgery in Urban 
Areas.--Section 1861(s)(2)(K)(ii) (42 U.S.C. 1395x(s)(2)(K)(ii)), as 
amended by subsection (a)(2), is further amended by adding ``or 
services as an assistant at surgery furnished by a nurse practitioner 
whose primary practice location (as defined by the Secretary) is in a 
rural area (as defined in section 1886(d)(2)(D)) to an individual who 
resides in a rural area when the service is furnished to such 
individual in an urban area by such practitioner when such practitioner 
refers such individual to an urban area for the furnishing of 
services'' after ``as defined by the Secretary''.
    (d) Conforming Amendments.--
            (1) Section 1861(b)(4) (42 U.S.C. 1395x(b)(4)) is amended 
        by striking ``subsection (s)(2)(K)(i)'' and inserting 
        ``subsection (s)(2)(K)''.
            (2) Section 1862(a)(14) (42 U.S.C. 1395y(a)(14)), as 
        amended by section 620(b)(4)(K), is amended by striking 
        ``section 1861(s)(2)(K)(i)'' and inserting ``section 
        1861(s)(2)(K)''.
            (3) Section 1866(a)(1)(H) (42 U.S.C. 1395cc(a)(1)(H)), as 
        amended by section 620(b)(4)(L)(ii), is further amended by 
        striking ``section 1861(s)(2)(K)(i)'' and inserting ``section 
        1861(s)(2)(K)''.
    (e) Effective Date.--The amendments made by this section shall 
apply to services furnished on or after January 1, 1997.

SEC. 643. GENERAL PART B PREMIUM.

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

              PART IV--PROVISIONS RELATED TO PARTS A AND B

SEC. 651. MEDICARE SECONDARY PAYER CHANGES.

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

SEC. 652. MODIFICATION TO PHYSICIAN REFERRAL EXCEPTION.

    Section 1877(d) (42 U.S.C. 1395nn(d)) is amended by adding the 
following new paragraph:
            ``(4) Frontier providers.--In the case of a designated 
        health service furnished in an urban area (as defined in 
        section 1886(d)(2)(D)) by an entity if--
                    ``(A) the entity is located more than 100 miles 
                from other like entities;
                    ``(B) no less than 50 percent of the patient-users 
                in the entity's service area utilize the entity; or
                    ``(C) because of the area's local topography or 
                periods of prolonged severe weather conditions, other 
                entities providing like services are not readily 
                accessible for at least 30 days in 2 out of 3 years.''.

SEC. 653. EXPANSION OF CENTERS OF EXCELLENCE.

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

SEC. 654. MEDICARE SELECT.

    (a) Amendments to Provisions Relating to Medicare Select 
Policies.--
            (1) Permitting medicare select policies in all states.--
        Subsection (c) of section 4358 of the Omnibus Budget 
        Reconciliation Act of 1990 is hereby repealed.
            (2) Requirements of medicare select policies.--Section 
        1882(t)(1) (42 U.S.C. 1395ss(t)(1)) is amended to read as 
        follows:
    ``(1)(A) If a medicare supplemental policy meets the requirements 
of the 1991 NAIC Model Regulation or 1991 Federal Regulation and 
otherwise complies with the requirements of this section except that--
            ``(i) the benefits under such policy are restricted to 
        items and services furnished by certain entities (or reduced 
        benefits are provided when items or services are furnished by 
        other entities), and
            ``(ii) in the case of a policy described in subparagraph 
        (C)(i)--
                    ``(I) the benefits under such policy are not one of 
                the groups or packages of benefits described in 
                subsection (p)(2)(A),
                    ``(II) except for nominal copayments imposed for 
                services covered under part B of this title, such 
                benefits include at least the core group of basic 
                benefits described in subsection (p)(2)(B), and
                    ``(III) an enrollee's liability under such policy 
                for physician's services covered under part B of this 
                title is limited to the nominal copayments described in 
                subclause (II),
        the policy shall nevertheless be treated as meeting those 
        requirements if the policy meets the requirements of 
        subparagraph (B).
    ``(B) A policy meets the requirements of this subparagraph if--
            ``(i) full benefits are provided for items and services 
        furnished through a network of entities which have entered into 
        contracts or agreements with the issuer of the policy,
            ``(ii) full benefits are provided for items and services 
        furnished by other entities if the services are medically 
        necessary and immediately required because of an unforeseen 
        illness, injury, or condition and it is not reasonable given 
        the circumstances to obtain the services through the network,
            ``(iii) the network offers sufficient access,
            ``(iv) the issuer of the policy has arrangements for an 
        ongoing quality assurance program for items and services 
        furnished through the network,
            ``(v)(I) the issuer of the policy provides to each enrollee 
        at the time of enrollment an explanation of--
                    ``(aa) the restrictions on payment under the policy 
                for services furnished other than by or through the 
                network,
                    ``(bb) out of area coverage under the policy,
                    ``(cc) the policy's coverage of emergency services 
                and urgently needed care, and
                    ``(dd) the availability of a policy through the 
                entity that meets the 1991 Model NAIC Regulation or 
                1991 Federal Regulation without regard to this 
                subsection and the premium charged for such policy, and
            ``(II) each enrollee prior to enrollment acknowledges 
        receipt of the explanation provided under subclause (I), and
            ``(vi) the issuer of the policy makes available to 
        individuals, in addition to the policy described in this 
        subsection, any policy (otherwise offered by the issuer to 
        individuals in the State) that meets the 1991 Model NAIC 
        Regulation or 1991 Federal Regulation and other requirements of 
        this section without regard to this subsection.
    ``(C)(i) A policy described in this subparagraph--
            ``(I) is offered by an eligible organization (as defined in 
        section 1876(b)),
            ``(II) is not a policy or plan providing benefits pursuant 
        to a contract under section 1876 or an approved demonstration 
        project described in section 603(c) of the Social Security 
        Amendments of 1983, section 2355 of the Deficit Reduction Act 
        of 1984, or section 9412(b) of the Omnibus Budget 
        Reconciliation Act of 1986, and
            ``(III) provides benefits which, when combined with 
        benefits which are available under this title, are 
        substantially similar to benefits under policies offered to 
        individuals who are not entitled to benefits under this title.
    ``(ii) In making a determination under subclause (III) of clause 
(i) as to whether certain benefits are substantially similar, there 
shall not be taken into account, except in the case of preventive 
services, benefits provided under policies offered to individuals who 
are not entitled to benefits under this title which are in addition to 
the benefits covered by this title and which are benefits an entity 
must provide in order to meet the definition of an eligible 
organization under section 1876(b)(1).''.
    (b) Renewability of Medicare Select Policies.--Section 1882(q)(1) 
(42 U.S.C. 1395ss(q)(1)) is amended--
            (1) by striking ``(1) Each'' and inserting ``(1)(A) Except 
        as provided in subparagraph (B), each'';
            (2) by redesignating subparagraphs (A) and (B) as clauses 
        (i) and (ii), respectively; and
            (3) by adding at the end the following new subparagraph:
            ``(B)(i) In the case of a policy that meets the 
        requirements of subsection (t), an issuer may cancel or 
        nonrenew such policy with respect to an individual who leaves 
        the service area of such policy; except that, if such 
        individual moves to a geographic area where such issuer, or 
        where an affiliate of such issuer, is issuing medicare 
        supplemental policies, such individual must be permitted to 
        enroll in any medicare supplemental policy offered by such 
        issuer or affiliate that provides benefits comparable to or 
        less than the benefits provided in the policy being canceled or 
        nonrenewed. An individual whose coverage is canceled or 
        nonrenewed under this subparagraph shall, as part of the notice 
        of termination or nonrenewal, be notified of the right to 
        enroll in other medicare supplemental policies offered by the 
        issuer or its affiliates.
            ``(ii) For purposes of this subparagraph, the term 
        `affiliate' shall have the meaning given such term by the 1991 
        NAIC Model Regulation.''.
    (c) Civil Penalty.--Section 1882(t)(2) (42 U.S.C. 1395ss(t)(2)) is 
amended--
            (1) by striking ``(2)'' and inserting ``(2)(A)'';
            (2) by redesignating subparagraphs (A), (B), (C), and (D) 
        as clauses (i), (ii), (iii), and (iv), respectively;
            (3) in clause (iv), as redesignated--
                    (A) by striking ``paragraph (1)(E)(i)'' and 
                inserting ``paragraph (1)(B)(v)(I); and
                    (B) by striking ``paragraph (1)(E)(ii)'' and 
                inserting ``paragraph (1)(B)(v)(II)'';
            (4) by striking ``the previous sentence'' and inserting 
        ``this subparagraph''; and
            (5) by adding at the end the following new subparagraph:
    ``(B) If the Secretary determines that an issuer of a policy 
approved under paragraph (1) has made a misrepresentation to the 
Secretary or has provided the Secretary with false information 
regarding such policy, the issuer is subject to a civil money penalty 
in an amount not to exceed $100,000 for each such determination. The 
provisions of section 1128A (other than the first sentence of 
subsection (a) and other than subsection (b)) shall apply to a civil 
money penalty under this subparagraph in the same manner as such 
provisions apply to a penalty or proceeding under section 1128A(a).''.
    (d) Effective Dates.--
            (1) NAIC standards.--If, within 9 months after the date of 
        the enactment of this Act, the National Association of 
        Insurance Commissioners (hereafter in this subsection referred 
        to as the ``NAIC'') makes changes in the 1991 NAIC Model 
        Regulation (as defined in section 1882(p)(1)(A) of the Social 
        Security Act) to incorporate the additional requirements 
        imposed by the amendments made by this section, section 
        1882(g)(2)(A) of such Act shall be applied in each State, 
        effective for policies issued to policyholders on and after the 
        date specified in paragraph (3), as if the reference to the 
        Model Regulation adopted on June 6, 1979, were a reference to 
        the 1991 NAIC Model Regulation (as so defined) as changed under 
        this paragraph (such changed Regulation referred to in this 
        subsection as the ``1995 NAIC Model Regulation'').
            (2) Secretary standards.--If the NAIC does not make changes 
        in the 1991 NAIC Model Regulation (as so defined) within the 9-
        month period specified in paragraph (1), the Secretary of 
        Health and Human Services (hereafter in this subsection 
        referred to as the ``Secretary'') shall promulgate a regulation 
        and section 1882(g)(2)(A) of the Social Security Act shall be 
        applied in each State, effective for policies issued to 
        policyholders on and after the date specified in paragraph (3), 
        as if the reference to the Model Regulation adopted on June 6, 
        1979, were a reference to the 1991 NAIC Model Regulation (as so 
        defined) as changed by the Secretary under this paragraph (such 
        changed Regulation referred to in this subsection as the ``1995 
        Federal Regulation'').
            (3) Date specified.--
                    (A) In general.--Subject to subparagraph (B), the 
                date specified in this paragraph for a State is the 
                earlier of--
                            (i) the date the State adopts the 1995 NAIC 
                        Model Regulation or the 1995 Federal 
                        Regulation, or
                            (ii) 1 year after the date the NAIC or the 
                        Secretary first adopts such regulations.
                    (B) Additional legislative action required.--In the 
                case of a State which the Secretary identifies, in 
                consultation with the NAIC, as--
                            (i) requiring State legislation (other than 
                        legislation appropriating funds) in order for 
                        medicare supplemental policies to meet the 1995 
                        NAIC Model Regulation or the 1995 Federal 
                        Regulation, but
                            (ii) having a legislature which is not 
                        scheduled to meet in 1995 in a legislative 
                        session in which such legislation may be 
                        considered,
                the date specified in this paragraph is the first day 
                of the first calendar quarter beginning after the close 
                of the first legislative session of the State 
                legislature that begins on or after January 1, 1996. 
                For purposes of the previous sentence, in the case of a 
                State that has a 2-year legislative session, each year 
                of such session shall be deemed to be a separate 
                regular session of the State legislature.

SEC. 655. MEDIGAP.

    (a) 30-Day Open Enrollment Period.--Section 1882(s) (42 U.S.C. 
1395ss(s)) is amended--
            (1) in paragraph (3), by striking ``paragraphs (1) and 
        (2)'' and inserting ``paragraph (1), (2), or (3)'',
            (2) by redesignating paragraph (3) as paragraph (4), and
            (3) by inserting after paragraph (2) the following new 
        paragraph:
    ``(3) Each issuer of a medicare supplemental policy shall have an 
open enrollment period of at least 30 days duration every year (which 
shall be the period specified by the Secretary under section 
1876(e)(1)), during which the issuer may not deny or condition the 
issuance or effectiveness of a medicare supplemental policy, or 
discriminate in the pricing of the policy, because of age, health 
status, claims experience, receipt of health care, or medical 
condition. The policy may not provide any time period applicable to 
pre-existing conditions, waiting periods, elimination periods, and 
probationary periods (except as provided by paragraph (2)(B)).''.
    (b) Effective Dates.--
            (1) NAIC standards.--If, within 9 months after the date of 
        the enactment of this Act, the National Association of 
        Insurance Commissioners (hereafter in this subsection referred 
        to as the ``NAIC'') makes changes in the 1991 NAIC Model 
        Regulation (as defined in section 1882(p)(1)(A) of the Social 
        Security Act) to incorporate the additional requirements 
        imposed by the amendments made by this section, section 
        1882(g)(2)(A) of such Act shall be applied in each State, 
        effective for policies issued to policyholders on and after the 
        date specified in paragraph (3), as if the reference to the 
        Model Regulation adopted on June 6, 1979, were a reference to 
        the 1991 NAIC Model Regulation (as so defined) as changed under 
        this paragraph (such changed Regulation referred to in this 
        subsection as the ``1995 NAIC Model Regulation'').
            (2) Secretary standards.--If the NAIC does not make changes 
        in the 1991 NAIC Model Regulation (as so defined) within the 9-
        month period specified in paragraph (1), the Secretary of 
        Health and Human Services (hereafter in this subsection 
        referred to as the ``Secretary'') shall promulgate a regulation 
        and section 1882(g)(2)(A) of the Social Security Act shall be 
        applied in each State, effective for policies issued to 
        policyholders on and after the date specified in paragraph (3), 
        as if the reference to the Model Regulation adopted on June 6, 
        1979, were a reference to the 1991 NAIC Model Regulation (as so 
        defined) as changed by the Secretary under this paragraph (such 
        changed Regulation referred to in this subsection as the ``1995 
        Federal Regulation'').

SEC. 656. REDUCTION IN ROUTINE COST LIMITS FOR HOME HEALTH SERVICES.

    (a) Reduction in Update To Maintain Freeze in 1996.--
            (1) In general.--Section 1861(v)(1)(L)(i) (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) Adjustment to limits.--Section 1861(v)(1)(L)(ii) (42 
        U.S.C. 1395x(v)(1)(L)(ii)) is amended by adding at the end the 
        following new sentence: ``The effect of the amendments made by 
        656(a) of the Health Security Act shall not be considered by 
        the Secretary in making adjustments pursuant to this clause.''.
    (b) Basing Limits in Subsequent Years on Median of Costs.--
            (1) In general.--Section 1861(v)(1)(L)(i) (42 U.S.C. 
        1395x(v)(1)(L)(i)), as amended by subsection (a), is amended in 
        the matter following subclause (IV) by striking ``the mean'' 
        and inserting ``the median''.
            (2) Effective date.--The amendment made by paragraph (1) 
        shall apply to cost reporting periods beginning on or after 
        July 1, 1997.

SEC. 657. TERMINATION OF GRADUATE MEDICAL EDUCATION PAYMENTS.

    (a) In General.--Section 1886(h) (42 U.S.C. 1395ww(h)) is amended 
by adding at the end the following new paragraph:
            ``(6) Termination of payments attributable to costs of 
        training physicians.--Notwithstanding any other provision of 
        this section or section 1861(v), no payment may be made under 
        this title for direct graduate medical education costs 
        attributable to an approved medical residency training program 
        for any cost reporting period (or portion thereof) beginning on 
        or after January 1, 1996.''.
    (b) Prohibition Against Recognition of Costs.--Section 1861(v)(1) 
(42 U.S.C. 1395x(v)(1)), as amended by section 612(b), is amended by 
adding at the end the following new subparagraph:
    ``(U) Such regulations shall not include any provision for specific 
recognition of the costs of graduate medical education for hospitals 
for any cost reporting period (or portion thereof) beginning on or 
after January 1, 1996. Nothing in the previous sentence shall be 
construed to affect in any way payments to hospitals for the costs of 
any approved educational activities that are not described in such 
sentence.''.

SEC. 658. EXTENSION OF SOCIAL HEALTH MAINTENANCE ORGANIZATION 
              DEMONSTRATIONS.

    Section 4018(b) of the Omnibus Budget Reconciliation Act of 1987, 
as amended by section 4207(b)(4)(B) of the Omnibus Budget 
Reconciliation Act of 1990 and section 13567(a) of the Omnibus Budget 
Reconciliation Act of 1993, is amended--
            (1) in paragraph (1), by striking ``December 31, 1997'' and 
        inserting ``December 31, 1999''; and
            (2) in paragraph (4), by striking ``March 31, 1998'' and 
        inserting ``March 31, 2000''.

SEC. 659. STUDY ON MEDICARE SPENDING.

    The Prospective Payment Assessment Commission (established under 
section 1886(e)(2) of the Social Security Act (42 U.S.C. 1395ww(e)(2))) 
and the Physician Payment Review Commission (established under section 
1845 of such Act (42 U.S.C. 1395w-1)) shall each conduct a study of the 
rate of increase in spending under title XVIII of such Act and make 
recommendations to Congress on strategies to slow the rate of growth. 
Such studies shall include--
            (1) an examination of ways to slow both the national rate 
        of growth and the rate of growth in community-rating areas; and
            (2) an assessment of whether setting local expenditure 
        targets or local volume performance standards would be 
        successful as part of this effort.

SEC. 660. STREAMLINED PROCESSING SYSTEMS.

    (a) In General.--The Secretary of Health and Human Services may 
develop a process to ensure that claims for services under title XVIII 
of the such Act are submitted first by the medicare program under such 
title, medicare supplemental policies (described in section 1886(g)(1) 
of such Act (42 U.S.C. 1395ww(g)(1)), and other policies that provide 
supplemental benefits under such title before providers can submit 
claims to medicare beneficiaries.
    (b) 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 
of such Act) are superseded to the extent required to carry out this 
section.

                     Subtitle B--Medical Education

SEC. 665. MEDICAL EDUCATION.

    Title XVIII of the Social Security Act (42 U.S.C. 1395 et seq.) is 
amended by adding at the end the following new part:

                      ``PART D--MEDICAL EDUCATION

      ``Subpart I--Approved Physician and Dental Training Programs

``SEC. 1893. APPROVED PHYSICIAN AND DENTAL TRAINING PROGRAMS.

    ``(a) Federal Payments to Qualified Applicants.--
            ``(1) In general.--In the case of a qualified applicant 
        that in accordance with paragraph (2) submits to the Secretary 
        an application for calendar year 1996 or any subsequent 
        calendar year, the Secretary shall make payments for such year 
        to the applicant for the purpose specified in paragraph (3). 
        The Secretary shall make the payments in an amount determined 
        in accordance with subsection (b) and may administer the 
        payments as a contract, grant, or cooperative agreement.
            ``(2) Application for payments.--For purposes of paragraph 
        (1), an application for payments under such paragraph for a 
        calendar year is in accordance with this paragraph if--
                    ``(A) the qualified applicant submits the 
                application not later than the date specified by the 
                Secretary;
                    ``(B) the application provides such assurances as 
                the Secretary may require that the qualified applicant 
                will expend payments only for the purpose described in 
                paragraph (3); and
                    ``(C) the application is in such form, is made in 
                such manner, and contains such agreements, assurances, 
                and information as the Secretary determines to be 
                necessary to carry out this section.
            ``(3) Payments for operation of approved medical training 
        programs.--The purpose of payments under paragraph (1) is to 
        assist each approved medical training program operated by the 
        qualified applicant with the costs of operation of such 
        programs.
    ``(b) Availability of Trust Fund for Payments; Annual Amount of 
Payments.--
            ``(1) Availability of funds from trust fund.--Except as 
        provided in section 1896, the following amounts shall be 
        available for a calendar year for making payments under 
        subsection (a) from the Graduate Medical and Nursing Education 
        Trust Fund established under section 9552(a)(2)(A) of the 
        Internal Revenue Code of 1986:
                    ``(A) In the case of calendar year 1996, 
                $3,200,000,000.
                    ``(B) In the case of calendar year 1997, 
                $3,550,000,000.
                    ``(C) In the case of calendar year 1998, 
                $5,800,000,000.
                    ``(D) In the case of each subsequent calendar year, 
                the amount specified in this paragraph in the previous 
                calendar year (without regard to any reduction of such 
                amount under section 1896) updated through the midpoint 
                of the year by the estimated percentage change in the 
                general health care inflation factor during the 12-
                month period ending at that midpoint, with appropriate 
                adjustments to reflect previous underestimations or 
                overestimations under this subparagraph in the 
                projected health care inflation factor.
            ``(2) Amount of payments for qualified applicants.--
                    ``(A) In general.--Subject to the annual amount 
                available under paragraph (1) for a calendar year, the 
                amount of payments required under subsection (a) to be 
                made to a qualified applicant that submits to the 
                Secretary an application for such year in accordance 
                with subsection (a)(2) is an amount equal to the 
                product of--
                            ``(i) the number of full-time equivalent 
                        training participants in the approved medical 
                        training program operated by the qualified 
                        applicant (as determined under subsection (c)); 
                        and
                            ``(ii) the average costs of the qualified 
                        applicant in training such a participant in a 
                        calendar year for the base period, updated 
                        through the midpoint of the year by the 
                        estimated percentage change in the health care 
                        inflation factor after the base period and up 
                        to and including the calendar year involved.
                For purposes of clause (ii), the term `base period' 
                means the most recent 2-year period for which the 
                Secretary can determine the training costs of the 
                qualified applicant. If the qualified applicant has not 
                been in operation for sufficient time to have a base 
                period, the amount determined under clause (ii) for 
                such applicant shall be the national average costs of 
                all qualified applicants operating the approved medical 
                training program for the most recent 2-year period (as 
                determined by the Secretary), updated in accordance 
                with clause (ii).
            ``(3) Limitation.--If the annual amount available under 
        paragraph (1) for a calendar year is insufficient for providing 
        each qualified applicant that submits to the Secretary an 
        application for such year in accordance with subsection (a)(2) 
        with the amount of payments determined under paragraph (2) for 
        the program for such year, the Secretary shall make such pro 
        rata reductions in the amounts so determined as may be 
        necessary to ensure that the total of payments made under 
        subsection (a) for such year equals the total of such amount.
    ``(c) Determination of Full-Time-Equivalent Training 
Participants.--
            ``(1) Rules.--The Secretary shall establish rules 
        consistent with this subsection for the computation of the 
        number of full-time-equivalent training participants in 
        approved medical training programs.
            ``(2) Adjustment for part-year or part-time training 
        participants.--Such rules shall take into account individuals 
        who serve as training participants for only a portion of a 
        period in an approved medical training program or 
        simultaneously with more than one such program.
            ``(3) Weighting factors for certain training 
        participants.--Subject to paragraph (4), such rules shall 
        provide, in calculating the number of full-time-equivalent 
        training participants in an approved medical training program--
                    ``(A) for a training participant who is in the 
                participant's initial training period, the weighting 
                factor is 1.00, and
                    ``(B) for a training participant who is not in the 
                participant's initial training period, the weighting 
                factor is .50.
            ``(4) Foreign medical graduates required to pass fmgems 
        examination.--Such rules shall provide that, in the case of an 
        individual who is a foreign medical graduate, the individual 
        shall not be counted as a training participant unless--
                    ``(A) the individual has passed the FMGEMS 
                examination, or
                    ``(B) the individual has previously received 
                certification from, or has previously passed the 
                examination of, the Educational Commission for Foreign 
                Medical Graduates.
            ``(5) Counting time spent in outpatient settings.--Such 
        rules shall provide that only time spent in activities relating 
        to patient care shall be counted and that all the time so spent 
        by a training participant under an approved physician training 
        program or approved dental training program shall be counted 
        toward the determination of full-time equivalency, without 
        regard to the setting in which the activities are performed.
    ``(d) Definitions.--For purposes of this section--
            ``(1) Approved dental training program.--The term `approved 
        dental training program' means--
                    ``(A) an internship, residency, or fellowship 
                program that is accredited by the Commission on Dental 
                Accreditation, or
                    ``(B) a post-doctoral dental training program in 
                oral medicine, oral radiology, dental anesthesia, or 
                geriatric dentistry, that is determined by the 
                Secretary to meet appropriate standards.
            ``(2) Approved medical training program.--the term 
        `approved medical training program' means an approved physician 
        training program, an approved dental training program, or an 
        approved podiatric training program.
            ``(3) Approved physician training program.--
                    ``(A) In general.--The term `approved physician 
                training program', with respect to the medical 
                speciality involved, means a residency or other 
                postgraduate program that trains physicians and meets 
                the following conditions:
                            ``(i) Participation in the program may be 
                        counted toward certification in the medical 
                        specialty.
                            ``(ii) The program is accredited by the 
                        Accreditation Council on Graduate Medical 
                        Education, or approved by the Council on 
                        Postgraduate Training of the American 
                        Osteopathic Association.
                    ``(B) Training in outpatient facilities.--The term 
                `approved physician training program' includes any 
                postgraduate program described in subparagraph (A) that 
                provides health services in an ambulatory setting, 
                without regard to whether the program provides 
                inpatient hospital services.
                    ``(C) Nonhospital training entities included.--The 
                term `approved physician training program' includes any 
                postgraduate program described in subparagraph (A), 
                whether operated by academic health centers, teaching 
                hospitals, multispecialty group practices, ambulatory 
                care providers, prepaid health plans, or other 
                entities.
            ``(4) Approved podiatric training program.--The term 
        `approved podiatric training program' includes a training 
        program approved by the Council of Podiatric Medical Education 
        of the American Podiatric Medical Association.
            ``(5) Foreign medical graduate.--The term `foreign medical 
        graduate' means a training participant who is a graduate of a 
        school of medicine, school of osteopathy, school of dentistry, 
        or school of podiatry that is not--
                    ``(A) a school of medicine accredited by the 
                Liaison Committee on Medical Education of the American 
                Medical Association and the Association of American 
                Medical Colleges (or approved by such Committee as 
                meeting the standards necessary for such 
                accreditation),
                    ``(B) a school of osteopathy accredited by the 
                American Osteopathic Association, or approved by such 
                Association as meeting the standards necessary for such 
                accreditation, or
                    ``(C) a school of dentistry or podiatry which is 
                accredited (or meets the standards for accreditation) 
                by an organization recognized by the Secretary for such 
                purpose.
            ``(6) FMGEMS examination.--The term `FMGEMS examination' 
        means parts I and II of the Foreign Medical Graduate 
        Examination in the Medical Sciences or any successor 
        examination recognized by the Secretary for this purpose.
            ``(7) General health care inflation factor.--The term 
        `general health care inflation factor' means the consumer price 
        index for medical services as determined by the Bureau of Labor 
        Statistics.
            ``(8) Initial training period.--The term `initial training 
        period' means the period of board eligibility, except that--
                    ``(A) except as provided in subparagraph (B), in no 
                case shall the initial period of participation exceed 
                an aggregate period of formal training of more than 
                five years for any individual, and
                    ``(B) a period, of not more than two years, during 
                which an individual is in a--
                            ``(i) joint M.D. and Ph.D. program of study 
                        or research as meets such criteria as the 
                        Secretary may establish;
                            ``(ii) residency or fellowship program in 
                        geriatric medicine, preventive medicine, or 
                        adolescent medicine; or
                            ``(iii) a primary care fellowship program 
                        which meets such criteria as the Secretary may 
                        establish,
                shall be treated as part of the initial training 
                participation period, but shall not be counted against 
                any limitation on the initial training period.
        The initial training period shall be determined, with respect 
        to a training participant, as of the time the training 
        participant enters the approved medical training program.
            ``(9) Period of board eligibility.--
                    ``(A) General rule.--Subject to subparagraphs (B) 
                and (C), the term `period of board eligibility' means, 
                for a training participant, the minimum number of years 
                of formal training necessary to satisfy the 
                requirements for initial board eligibility in the 
                particular specialty for which the training participant 
                is training.
                    ``(B) Application of 1985-1986 directory.--Except 
                as provided in subparagraph (C), the period of board 
                eligibility shall be such period specified in the 1985-
                1986 Directory of Residency Training Programs published 
                by the Accreditation Council on Graduate Medical 
                Education.
                    ``(C) Changes in period of board eligibility.--If 
                the Accreditation Council on Graduate Medical 
                Education, in its Directory of Residency Training 
                Programs.--
                            ``(i) increases the minimum number of years 
                        of formal training necessary to satisfy the 
                        requirements for a specialty, above the period 
                        specified in its 1985-1986 Directory, the 
                        Secretary may increase the period of board 
                        eligibility for that specialty, but not to 
                        exceed the period of board eligibility 
                        specified in that later Directory, or
                            ``(ii) decreases the minimum number of 
                        years of formal training necessary to satisfy 
                        the requirements for a specialty, below the 
                        period specified in its 1985-1986 Directory, 
                        the Secretary may decrease the period of board 
                        eligibility for that specialty, but not below 
                        the period of board eligibility specified in 
                        that later Directory.
            ``(10) Qualified applicant.--The term `qualified applicant' 
        means an entity that operates an approved medical training 
        program.
            ``(11) Training participant.--The term `training 
        participant' means an individual who is enrolled in an approved 
        medical training program.

``SEC. 1894. GRADUATE NURSING EDUCATION PAYMENTS

    ``(a) Federal Payments to Graduate Nurse Training Programs.--
            ``(1) In general.--In the case of a graduate nurse training 
        program that in accordance with paragraph (2) submits to the 
        Secretary an application for calendar year 1996 or any 
        subsequent calendar year, the Secretary shall make payments for 
        such year to the program for the purpose specified in paragraph 
        (3). The Secretary shall make the payments in an amount 
        determined in accordance with subsection (b), and may 
        administer the payments as a contract, grant, or cooperative 
        agreement.
            ``(2) Application for payments.--For purposes of paragraph 
        (1), an application for payments under such paragraph for a 
        calendar year is in accordance with this paragraph if--
                    ``(A) the graduate nurse training program involved 
                submits the application not later than the date 
                specified by the Secretary;
                    ``(B) the application provides such assurances as 
                the Secretary may require that the program will expend 
                payments only for the purpose described in paragraph 
                (3); and
                    ``(C) the application is in such form, is made in 
                such manner, and contains such agreements, assurances, 
                and information as the Secretary determines to be 
                necessary to carry out this section.
            ``(3) Payments for operation of graduate nurse training 
        programs.--The purpose of payments under paragraph (1) is to 
        assist a graduate nurse training program with the costs of 
        operation.
    ``(b) Availability of Trust Fund for Payments; Annual Amount of 
Payments.--
            ``(1) Availability of funds from trust fund.--Except as 
        provided in section 1896, the following amounts shall be 
        available for a calendar year for making payments under 
        subsection (a) from the Graduate Medical and Nursing Education 
        Trust Fund established under section 9552(a)(2)(A) of the 
        Internal Revenue Code of 1986:
                    ``(A) In the case of calendar year 1996, 
                $200,000,000.
                    ``(B) In the case of each subsequent calendar year, 
                the amount specified in this paragraph in the previous 
                calendar year (without regard to any reduction of such 
                amount under section 1896) updated through the midpoint 
                of the year by the estimated percentage change in the 
                general health care inflation factor during the 12-
                month period ending at that midpoint, with appropriate 
                adjustments to reflect previous underestimations or 
                overestimations under this subparagraph in the 
                projected health care inflation factor.
            ``(2) Amount of payments for individual eligible 
        programs.--Subject to the annual amount available under 
        paragraph (1) for a calendar year, the amount of payments 
        required under subsection (a) to be made to a graduate nurse 
        training program that submits to the Secretary an application 
        for such year in accordance with subsection (a)(2) is an amount 
        equal to the product of--
                    ``(A) the number of full-time equivalent training 
                participants in the program determined in accordance 
                with paragraph (3); and
                    ``(B) the national average per participant cost of 
                all graduate nurse training programs for the most 
                recent 2-year period (as determined by the Secretary), 
                adjusted for geography and other factors to be 
                determined by the Secretary and updated through the 
                midpoint of the year by the estimated percentage change 
                in the health care inflation factor after the base 
                period up to and including the calendar year involved.
            ``(3) Determination of full-time equivalent training 
        participants.--The Secretary shall develop a method for 
        determining full-time equivalent training participants in 
        graduate nurse training programs for purposes of determining 
        payments under this section.
            ``(4) Limitation.--If the annual amount available under 
        paragraph (1) for a calendar year is insufficient for providing 
        each graduate nurse training program that submits to the 
        Secretary an application for such year in accordance with 
        subsection (a)(2) with the amount of payments determined under 
        paragraph (2) for the program for such year, the Secretary 
        shall make such pro rata reductions in the amounts so 
        determined as may be necessary to ensure that the total of 
        payments made under subsection (a) for such year equals the 
        total of such amount.
    ``(c) Definitions.--For purposes of this section--
            ``(1) Graduate nurse training program.--The term `graduate 
        nurse training program' means a program for advanced nurse 
        education, a program for education as a nurse practitioner, a 
        program for education as a nurse midwife, a program for 
        education as a nurse anesthetist, and such other programs for 
        training in clinical nurse specialties as are determined by the 
        Secretary to require advanced education.
            ``(2) Program for advanced nurse education.--The term 
        `program for advanced nurse education' means a program meeting 
        the conditions to be a program for which awards of grants and 
        contracts may be made under section 821 of the Public Health 
        Service Act.
            ``(3) Program for education as nurse practitioner.--The 
        term `program for education as a nurse practitioner' means a 
        program meeting the conditions to be a program for which awards 
        of grants and contracts may be made under section 822 of the 
        Public Health Service Act for education as a nurse 
        practitioners.
            ``(4) Program for education as nurse midwife.--The term 
        `program for education as a nurse midwife'' means a program 
        meeting the conditions to be a program for which awards of 
        grants and contracts may be made under section 822 of the 
        Public Health Service Act for education as nurse midwives.
            ``(5) Program for education as nurse anesthetist.--The term 
        `program for education as a nurse anesthetist' means a program 
        meeting the conditions to be a program for which awards of 
        grants may be made under section 831 of the Public Health 
        Service Act for education as nurse anesthetists.
            ``(6) General health care inflation factor.--The term 
        `general health care inflation factor', has the meaning given 
        such term in section 1893(d)(7) for such year.

``SEC. 1895. MEDICAL SCHOOL PAYMENTS.

    ``(a) Federal Payments to Medical Schools for Certain Costs.--
            ``(1) In general.--In the case of a medical school that in 
        accordance with paragraph (2) submits to the Secretary an 
        application for calendar year 1996 or any subsequent calendar 
        year, the Secretary shall make payments for such year to the 
        program for the purpose specified in paragraph (3). The 
        Secretary shall make the payments in an amount determined in 
        accordance with subsection (b), and may administer the payments 
        as a contract, grant, or cooperative agreement.
            ``(2) Application for payments.--For purposes of paragraph 
        (1), an application for payments under such paragraph for a 
        calendar year is in accordance with this paragraph if--
                    ``(A) the medical school involved submits the 
                application not later than the date specified by the 
                Secretary; and
                    ``(B) the application is in such form, is made in 
                such manner, and contains such agreements, assurances, 
                and information as the Secretary determines to be 
                necessary to carry out this section.
            ``(3) Purpose of payments.--The purpose of payments under 
        paragraph (1) is to assist a medical school with the costs 
        associated with the transition to managed competition and 
        expanded ambulatory teaching services.
    ``(b) Availability of Trust Fund for Payments; Annual Amount of 
Payments.--
            ``(1) Availability of trust fund for payments.--Except as 
        provided in section 1896, the following amounts shall be 
        available for a calendar year for making payments under 
        subsection (a) from the Graduate Medical and Nursing Education 
        Trust Fund established under section 9552(a)(2)(A) of the 
        Internal Revenue Code of 1986:
                    ``(A) In the case of calendar year 1996, 
                $200,000,000.
                    ``(B) In the case of calendar year 1997, 
                $300,000,000.
                    ``(C) In the case of calendar year 1998, 
                $400,000,000.
                    ``(D) In the case of calendar year 1999, 
                $500,000,000.
                    ``(E) In the case of calendar year 2000, 
                $600,000,000.
                    ``(F) In the case of each subsequent calendar year, 
                the amount specified in this paragraph in the previous 
                calendar year (without regard to any reduction of such 
                amount under section 1896) updated through the midpoint 
                of the year by the estimated percentage change in the 
                general health care inflation factor (as defined in 
                section 1893(d)(7)) during the 12-month period ending 
                at that midpoint, with appropriate adjustments to 
                reflect previous underestimations or overestimations 
                under this subparagraph in the projected health care 
                inflation factor.
            ``(2) Amount of payments for medical schools.--
                    ``(A) In general.--Subject to the annual amount 
                available under paragraph (1) for a calendar year, the 
                amount of payments required under subsection (a) to be 
                made to a medical school that submits to the Secretary 
                an application for such year in accordance with 
                subsection (a)(2) is an amount equal to an amount 
                determined by the Secretary in accordance with 
                subparagraph (B).
                    ``(B) Development of formula.--The Secretary shall 
                develop a formula for allocation of funds to medical 
                schools under this section consistent with the purpose 
                described in subsection (a)(3).
    ``(c) Limitation.--If the annual amount available under subsection 
(b) for a calendar year is insufficient for providing each medical 
school that submits to the Secretary an application for such year in 
accordance with subsection (a)(2) with the amount of payments 
determined under subsection (b)(2) for the program for such year, the 
Secretary shall make such pro rata reductions in the amounts so 
determined as may be necessary to ensure that the total of payments 
made under subsection (a) for such year equals the total of such 
amount.
    ``(d) Medical School Defined.--For purposes of this section, the 
term `medical school' means a school of medicine (as defined in section 
799 of the Public Health Service Act) or a school of osteopathic 
medicine (as defined in such section).

``SEC. 1896. AMOUNTS IN TRUST FUND INSUFFICIENT.

    ``If the sum of the amounts specified in sections 1893(b)(1), 
1894(b)(1), and 1895(b)(1) for a calendar year exceeds the amounts 
available for such calendar year in the Graduate Medical Education and 
Nursing Trust Fund established under section 9552(a)(2)(A) of the 
Internal Revenue Code of 1986, then each such amount shall be reduced 
to an amount which bears the same ratio to such amount as the amounts 
available bear to the sum of such amounts.

 ``Subpart II--Academic Health Centers and Other Eligible Institutions

``SEC. 1897. ACADEMIC HEALTH CENTERS AND OTHER ELIGIBLE INSTITUTIONS.

    ``(a) Federal Payments to Academic Health Centers and Other 
Eligible Institutions.--
            ``(1) In general.--In the case of an eligible institution, 
        that in accordance with paragraph (2) submits to the Secretary 
        an application for calendar year 1996 or any subsequent 
        calendar year, the Secretary shall make payments for such year 
        to the institution for the purposes specified in paragraph (3). 
        The Secretary shall make the payments in an amount determined 
        in accordance with subsection (b), and may administer the 
        payments as a contract, grant, or cooperative agreement.
            ``(2) Application.--For purposes of paragraph (1), an 
        application for payments under such paragraph for a calendar 
        year is in accordance with this paragraph if--
                    ``(A) the eligible institution involved submits the 
                application at such time, in such manner, and 
                accompanied by such agreements, and information as the 
                Secretary may determine necessary to carry out this 
                section; and
                    ``(B) such application is accompanied by--
                            ``(i) an assurance that, in exchange for 
                        receiving payments under paragraph (1), the 
                        eligible institution shall agree to maintain 
                        its status as an eligible institution; and
                            ``(ii) such additional assurances as the 
                        Secretary may reasonably require consistent 
                        with the purposes of this section.
            ``(3) Payment for costs incurred by eligible 
        institutions.--
                    ``(A) Non-comparable costs of academic health 
                centers and other teaching hospitals.--With respect to 
                an eligible institution that is a qualified academic 
                health center or a qualified teaching hospital, the 
                purpose of payments under paragraph (1) is to assist 
                such institutions with costs that are not routinely 
                incurred by other entities in providing health 
                services, but are incurred by such institutions in 
                providing health services. Such costs include--
                            ``(i) with respect to productivity in the 
                        provision of health services, costs resulting 
                        from the reduced rate of productivity of 
                        faculty due to teaching responsibilities;
                            ``(ii) the uncompensated costs of clinical 
                        research;
                            ``(iii) exceptional costs associated with 
                        the treatment of health conditions with respect 
                        to which an eligible institution has 
                        specialized expertise (including treatment of 
                        rare diseases, treatment of unusually severe 
                        conditions, and providing other specialized 
                        health care); and
                            ``(iv) the costs of treating a substantial 
                        number of severely ill patients.
                    ``(B) Other costs.--With respect to--
                            ``(i) an eligible institution that is a 
                        school of dentistry, the purpose of payments 
                        under paragraph (1) is to assist such school 
                        with the costs of training dentists, including 
                        unreimbursed oral health care costs; and
                            ``(ii) an eligible institution that is a 
                        high intensity nonteaching rural hospital, the 
                        purpose of payments under paragraph (1) is to 
                        assist the institution with the costs described 
                        under subparagraph (A)(iv).
    ``(b) Availability of Trust Fund for Payments; Annual Amount of 
Payments.--
            ``(1) Availability of funds from trust fund.--Except as 
        provided in subsection (e), the following amounts shall be 
        available for a calendar year for making payments under 
        subsection (a) from the Academic Health Center Trust Fund 
        established under section 9552(a)(2)(B) of the Internal Revenue 
        Code of 1986:
                    ``(A) In the case of calendar year 1996, 
                $6,280,000,000.
                    ``(B) In the case of calendar year 1997, 
                $7,250,000,000.
                    ``(C) In the case of calendar year 1998, 
                $8,220,000,000.
                    ``(D) In the case of calendar year 1999, 
                $9,400,000,000.
                    ``(E) In the case of calendar year 2000, 
                $10,640,000,000.
                    ``(F) In the case of each subsequent calendar year, 
                the amount specified in this paragraph in the previous 
                calendar year (without regard to any reduction of such 
                amount under subsection (e)) updated through the 
                midpoint of the year by the estimated percentage change 
                in the general health care inflation factor (as defined 
                in section 1893(d)(7)) during the 12-month period 
                ending at that midpoint, with appropriate adjustments 
                to reflect previous underestimations or overestimations 
                under this subparagraph in the projected health care 
                inflation factor.
            ``(2) Special allotments.--Of the amounts available for a 
        calendar year for making payments under subsection (a) pursuant 
        to paragraph (1)--
                    ``(A) such amounts as are necessary shall be 
                reserved to make payments to eligible institutions that 
                are high intensity nonteaching rural hospitals; and
                    ``(B) after reserving the amounts described in 
                subparagraph (A), the following amounts shall be 
                reserved to make payments to eligible institutions that 
                are schools of dentistry:
                            ``(i) In the case of calendar year 1996, 
                        $50,000,000.
                            ``(ii) In the case of each subsequent 
                        calendar year, the amount specified in this 
                        subparagraph for the previous calendar year 
                        updated through the midpoint of the year by the 
                        estimated percentage change in the general 
                        health care inflation factor during the 12-
                        month period ending at that midpoint, with 
                        appropriate adjustments to reflect previous 
                        underestimations or overestimations under this 
                        clause in the projected health care inflation 
                        factor.
            ``(3) Amount of payments for eligible institutions.--
                    ``(A) Qualified academic health center or qualified 
                teaching hospital.--Subject to the annual amount 
                available under paragraphs (1) and (2) for a calendar 
                year, the amount of payments required under subsection 
                (a) to be made to a qualified academic health center or 
                qualified teaching hospital is an amount equal to--
                            ``(i) the inpatient costs of the qualified 
                        academic health center or qualified teaching 
                        hospital for furnishing patient care for all 
                        patients for the calendar year, multiplied by
                            ``(ii) (e raised to the power (.405 x r)-
                        1), where `r' is the ratio of the qualified 
                        academic health center's or the qualified 
                        teaching hospital's full-time equivalent 
                        training participants (as determined under 
                        section 1893(c)) to beds for such center or 
                        institution for the calendar year and `e' is 
                        the natural log of one.
                    ``(B) School of dentistry.--Subject to the annual 
                amount available under paragraphs (1) and (2) for a 
                calendar year, the amount required under subsection (a) 
                to be made to a school of dentistry is an amount equal 
                to the sum of--
                            ``(i) 75 percent of the amount available 
                        pursuant to paragraph (2)(B) multiplied by the 
                        ratio of the number of full-time equivalent 
                        training participants in the school of 
                        dentistry (determined in accordance with a 
                        method to be developed by the Secretary) to the 
                        national number of full-time equivalent 
                        training participants in all schools of 
                        dentistry (as determined by the Secretary); and
                            ``(ii) 25 percent of the amount available 
                        pursuant to paragraph (2)(B) multiplied by the 
                        ratio of the unreimbursed oral health care 
                        costs of the school of dentistry to the 
                        national unreimbursed oral health care costs of 
                        all schools of dentistry (as determined by the 
                        Secretary).
                    ``(C) High intensity nonteaching rural hospital.--
                Subject to the annual amount available under paragraphs 
                (1) and (2) for a calendar year, the amount required 
                under subsection (a) to be made to a high intensity 
                nonteaching rural hospital is an amount equal to 5 
                percent of the inpatient costs of patient care for all 
                patients of the hospital.
            ``(4) Limitation.--If the annual amount available under 
        paragraph (1) for a calendar year is insufficient for providing 
        each eligible institution that submits to the Secretary an 
        application for such year in accordance with subsection (a)(2) 
        with the amount of payments determined under paragraph (3) for 
        the institution for such year or is in excess of the amount 
        required for making such payments for such year, the Secretary 
        shall make such pro rata reductions or increases in the amounts 
        so determined as may be necessary to ensure that the total of 
        payments made under subsection (a) for such year equals the 
        total of such amount.
    ``(c) Report on Modifications in Formula.--Not later than July 1, 
1996, the Secretary shall submit to the Congress a report containing 
any recommendations of the Secretary regarding policies for allocating 
amounts under subsection (b)(3) among eligible institutions. In making 
such recommendations, the Secretary shall consider the costs described 
in subsection (a)(3) (including outpatient costs) that are incurred by 
such institutions.
    ``(d) Definitions.--For purposes of this section:
            ``(1) Qualified academic health center.--The term 
        `qualified academic health center' means an entity that--

             Subtitle C--Home and Community-Based Services

SEC. 667. STATE PROGRAMS FOR HOME AND COMMUNITY-BASED SERVICES FOR 
              INDIVIDUALS WITH DISABILITIES.

    (a) In General.--Title XIX of the Social Security Act (42 U.S.C. 
1396 et seq.), as amended by section 301, is amended by adding at the 
end the following new part:

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

``SEC. 1971. STATE PROGRAMS FOR HOME AND COMMUNITY-BASED SERVICES FOR 
              INDIVIDUALS WITH DISABILITIES.

    ``(a) In General.--Each State that has a plan for home and 
community-based services for individuals with disabilities submitted to 
and approved by the Secretary under section 1972(b) is entitled to 
payment in accordance with section 1978.
    ``(b) Entitlement to Services.--Nothing in this part shall be 
construed to create a right to services for individuals or a 
requirement that a State with an approved plan expend the entire amount 
of funds to which it is entitled under this part.
    ``(c) Designation of Agency.--Not later than 6 months after the 
date of enactment of this part, the Secretary shall designate an agency 
responsible for program administration under this part.

``SEC. 1972. STATE PLANS.

    ``(a) Plan Requirements.--In order to be approved under subsection 
(b), a State plan for home and community-based services for individuals 
with disabilities must meet the following requirements:
            ``(1) Eligibility.--
                    ``(A) In general.--Within the amounts provided by 
                the State and under section 1978 for such plan, the 
                plan shall provide that services under the plan will be 
                available to individuals with disabilities (as defined 
                in section 1973(a)) in the State.
                    ``(B) Initial screening.--The plan shall provide a 
                process for the initial screening of an individual who 
                has some reasonable probability of being an individual 
                with disabilities. Any such process shall require the 
                provision of assistance to individuals who wish to 
                apply but whose disability limits their ability to 
                apply. The initial screening and the determination of 
                disability (as defined under section 1973(b)(1)) shall 
                be conducted by a public agency.
                    ``(C) Restrictions.--The plan may not limit the 
                eligibility of individuals with disabilities based on--
                            ``(i) income,
                            ``(ii) age,
                            ``(iii) geography,
                            ``(iv) nature or category of disability,
                            ``(v) residential setting (other than an 
                        institutional setting), or
                            ``(vi) other grounds specified by the 
                        Secretary;
                except that the Secretary may permit a State to limit 
                eligibility based on level of disability.
                    ``(D) Continuation of services.--The plan must 
                provide assurances that, in the case of an individual 
                receiving medical assistance for home and community-
                based services under the State medicaid plan as of the 
                date the first State plan is approved under this part, 
                the State will continue to make available (either under 
                this plan, under the State medicaid plan, or otherwise) 
                to such individual an appropriate level of assistance 
                for home and community-based services, taking into 
                account the level of assistance provided as of such 
                date and the individual's need for home and community-
                based services.
            ``(2) Services.--
                    ``(A) Needs assessment.--Not later than the end of 
                the second year of implementation, the plan or its 
                amendments shall include the results of a statewide 
                assessment of the needs of individuals with 
                disabilities in a format required by the Secretary. The 
                needs assessment shall include demographic data 
                concerning the number of individuals within each 
                category of disability described in this part, and the 
                services available to meet the needs of such 
                individuals.
                    ``(B) Specification.--Consistent with section 1974, 
                the plan shall specify--
                            ``(i) the services made available under the 
                        plan,
                            ``(ii) the extent and manner in which such 
                        services are allocated and made available to 
                        individuals with disabilities, and
                            ``(iii) the manner in which services under 
                        the plan are coordinated with each other and 
                        with health and long-term care services 
                        available outside the plan for individuals with 
                        disabilities.
                    ``(C) Taking into account informal care.--A State 
                plan may take into account, in determining the amount 
                and array of services made available to covered 
                individuals with disabilities, the availability of 
                informal care.
                    ``(D) Allocation.--The State plan--
                            ``(i) shall specify how services under the 
                        plan will be allocated among covered 
                        individuals with disabilities,
                            ``(ii) shall attempt to meet the needs of 
                        individuals with a variety of disabilities 
                        within the limits of available funding,
                            ``(iii) shall include services that assist 
                        all categories of individuals with 
                        disabilities, regardless of their age or the 
                        nature of their disabling conditions,
                            ``(iv) shall demonstrate that services are 
                        allocated equitably, in accordance with the 
                        needs assessment required under subparagraph 
                        (A), and
                            ``(v) shall ensure that--
                                    ``(I) the proportion of the 
                                population of low-income individuals 
                                with disabilities in the State that 
                                represents individuals with 
                                disabilities who are provided home and 
                                community-based services either under 
                                the plan, under the State medicaid 
                                plan, or under both, is not less than,
                                    ``(II) the proportion of the 
                                population of the State that represents 
                                individuals who are low-income 
                                individuals.
                    ``(E) Limitation on licensure or certification.--
                The State may not subject consumer-directed providers 
                of personal assistance services to licensure, 
                certification, or other requirements which the 
                Secretary finds not to be necessary for the health and 
                safety of individuals with disabilities.
                    ``(F) Consumer choice.--To the extent feasible, the 
                State shall follow the choice of an individual with 
                disabilities (or that individual's designated 
                representative who may be a family member) regarding 
                which covered services to receive and the providers who 
                will provide such services.
            ``(3) Cost sharing.--The plan shall impose cost sharing 
        with respect to covered services in accordance with section 
        1975.
            ``(4) Types of providers and requirements for 
        participation.--The plan shall specify--
                    ``(A) the types of service providers eligible to 
                participate in the program under the plan, which shall 
                include consumer-directed providers of personal 
                assistance services, except that the plan--
                            ``(i) may not limit benefits to services 
                        provided by registered nurses or licensed 
                        practical nurses; and
                            ``(ii) may not limit benefits to services 
                        provided by agencies or providers certified 
                        under title XVIII; and
                    ``(B) any requirements for participation applicable 
                to each type of service provider.
            ``(5) Provider reimbursement.--
                    ``(A) Payment methods.--The plan shall specify the 
                payment methods to be used to reimburse providers for 
                services furnished under the plan. Such methods may 
                include retrospective reimbursement on a fee-for-
                service basis, prepayment on a capitation basis, 
                payment by cash or vouchers to individuals with 
                disabilities, or any combination of these methods. In 
                the case of payment to consumer-directed providers of 
                personal assistance services, including payment through 
                the use of cash or vouchers, the plan shall specify how 
                the plan will assure compliance with applicable 
                employment tax and health care coverage provisions.
                    ``(B) Payment rates.--The plan shall specify the 
                methods and criteria to be used to set payment rates 
                for--
                            ``(i) agency administered services 
                        furnished under the plan; and
                            ``(ii) consumer-directed personal 
                        assistance services furnished under the plan, 
                        including cash payments or vouchers to 
                        individuals with disabilities, except that such 
                        payments shall be adequate to cover amounts 
                        required under applicable employment tax and 
                        health care coverage provisions.
                    ``(C) Plan payment as payment in full.--The plan 
                shall restrict payment under the plan for covered 
                services to those providers that agree to accept the 
                payment under the plan (at the rates established 
                pursuant to subparagraph (B)) and any cost sharing 
                permitted or provided for under section 1975 as payment 
                in full for services furnished under the plan.
            ``(7) Quality assurance and safeguards.--The State plan 
        shall provide for quality assurance and safeguards for 
        applicants and beneficiaries in accordance with section 1976.
            ``(8) Advisory group.--The State plan shall--
                    ``(A) assure the establishment and maintenance of 
                an advisory group under section 1977(b), and
                    ``(B) include the documentation prepared by the 
                group under section 1977(b)(4).
            ``(9) Administration and access.--
                    ``(A) State agency.--The plan shall designate a 
                State agency or agencies to administer (or to supervise 
                the administration of) the plan.
                    ``(B) Coordination.--The plan shall specify how it 
                will--
                            ``(i) coordinate services provided under 
                        the plan, including eligibility prescreening, 
                        service coordination, and referrals for 
                        individuals with disabilities who are 
                        ineligible for services under this part with 
                        the State medicaid plan, titles V and XX, 
                        programs under the Older Americans Act of 1965, 
                        programs under the Developmental Disabilities 
                        Assistance and Bill of Rights Act, the 
                        Individuals with Disabilities Education Act, 
                        and any other Federal or State programs that 
                        provide services or assistance targeted to 
                        individuals with disabilities, and
                            ``(ii) coordinate with health plans.
                    ``(C) Administrative expenditures.--Effective 
                beginning with fiscal year 2003, the plan shall contain 
                assurances that not more than 10 percent of 
                expenditures under the plan for all quarters in any 
                fiscal year shall be for administrative costs.
            ``(10) Reports and information to secretary; audits.--The 
        plan shall provide that the State will furnish to the 
        Secretary--
                    ``(A) such reports, and will cooperate with such 
                audits, as the Secretary determines are needed 
                concerning the State's administration of its plan under 
                this part, including the processing of claims under the 
                plan, and
                    ``(B) such data and information as the Secretary 
                may require in a uniform format as specified by the 
                Secretary.
            ``(11) Use of state funds for matching.--The plan shall 
        provide assurances that Federal funds will not be used to 
        provide for the State share of expenditures under this part.
            ``(12) Health care worker redeployment.--The plan shall 
        provide for the following:
                    ``(A) Before initiating the process of implementing 
                the State program under such plan, negotiations will be 
                commenced with labor unions representing the employees 
                of the affected hospitals or other facilities.
                    ``(B) Negotiations under subparagraph (A) will 
                address the following:
                            ``(i) The impact of the implementation of 
                        the program upon the workforce.
                            ``(ii) Methods to redeploy workers to 
                        positions in the proposed system, in the case 
                        of workers affected by the program.
                    ``(C) The plan will provide evidence that there has 
                been compliance with subparagraphs (A) and (B), 
                including a description of the results of the 
                negotiations.
            ``(13) Terminology.--The plan shall adhere to uniform 
        definitions of terms, as specified by the Secretary.
    ``(b) Approval of Plans.--The Secretary shall approve a plan 
submitted by a State if the Secretary determines that the plan--
            ``(1) was developed by the State after a public comment 
        period of not less than 30 days, and
            ``(2) meets the requirements of subsection (a).
The approval of such a plan shall take effect as of the first day of 
the first fiscal year beginning after the date of such approval (except 
that any approval made before January 1, 1998, shall be effective as of 
January 1, 1998). In order to budget funds allotted under this part, 
the Secretary shall establish a deadline for the submission of such a 
plan before the beginning of a fiscal year as a condition of its 
approval effective with that fiscal year. Any significant changes to 
the State plan shall be submitted to the Secretary in the form of plan 
amendments and shall be subject to approval by the Secretary.
    ``(c) Monitoring.--The Secretary shall annually monitor the 
compliance of State plans with the requirements of this part according 
to specified performance standards. States that fail to comply with 
such requirements may be subject to the withholding of Federal funds 
for services or administration until such time as compliance is 
achieved.
    ``(d) Technical assistance.--The Secretary shall ensure the 
availability of ongoing technical assistance to States under this 
section. Such assistance shall include serving as a clearinghouse for 
information regarding successful practices in providing long-term care 
services.
    ``(e) Regulations.--The Secretary shall issue such regulations as 
may be appropriate to carry out this part on a timely basis.

``SEC. 1973. INDIVIDUALS WITH DISABILITIES DEFINED.

    ``(a) In General.--For purposes of this part, the term `individual 
with disabilities' means any individual within one or more of the 
following categories of individuals:
            ``(1) Individuals requiring help with activities of daily 
        living.--An individual of any age who--
                    ``(A) requires hands-on or standby assistance, 
                supervision, or cueing (as defined in regulations) to 
                perform three or more activities of daily living (as 
                defined in subsection (d)), and
                    ``(B) is expected to require such assistance, 
                supervision, or cueing over a period of at least 90 
                days.
            ``(2) Individuals with severe cognitive or mental 
        impairment.--An individual of any age--
                    ``(A) whose score, on a standard mental status 
                protocol (or protocols) appropriate for measuring the 
                individual's particular condition specified by the 
                Secretary, indicates either severe cognitive impairment 
                or severe mental impairment, or both;
                    ``(B) who--
                            ``(i) requires hands-on or standby 
                        assistance, supervision, or cueing with one or 
                        more activities of daily living,
                            ``(ii) requires hands-on or standby 
                        assistance, supervision, or cueing with at 
                        least such instrumental activity (or 
                        activities) of daily living related to 
                        cognitive or mental impairment as the Secretary 
                        specifies, or
                            ``(iii) displays symptoms of one or more 
                        serious behavioral problems (that is on a list 
                        of such problems specified by the Secretary) 
                        which create a need for supervision to prevent 
                        harm to self or others; and
                    ``(C) who is expected to meet the requirements of 
                subparagraphs (A) and (B) over a period of at least 90 
                days.
        Not later than 2 years after the date of enactment of this 
        part, the Secretary shall make recommendations regarding the 
        most appropriate duration of disability under this paragraph.
            ``(3) Individuals with severe or profound mental 
        retardation.--An individual of any age who has severe or 
        profound mental retardation (as determined according to a 
        protocol specified by the Secretary).
            ``(4) Young children with severe disabilities.--An 
        individual under 6 years of age who--
                    ``(A) has a severe disability or chronic medical 
                condition that limits functioning in a manner that is 
                comparable in severity to the standards established 
                under paragraphs (1), (2), or (3), and
                    ``(B) is expected to have such a disability or 
                condition and require such services over a period of at 
                least 90 days.
    ``(b) Determination.--
            ``(1) In general.--In formulating eligibility criteria 
        under subsection (a), the Secretary shall establish criteria 
        for assessing the functional level of disability among all 
        categories of individuals with disabilities that are comparable 
        in severity, regardless of the age or the nature of the 
        disabling condition of the individual. The determination of 
        whether an individual is an individual with disabilities shall 
        be made by a public or nonprofit agency that is specified under 
        the State plan and that is not a provider of home and 
        community-based services under this part and by using a uniform 
        protocol consisting of an initial screening and a determination 
        of disability specified by the Secretary. A State may not 
        impose cost sharing with respect to a determination of 
        disability. A State may collect additional information, at the 
        time of obtaining information to make such determination, in 
        order to provide for the assessment and plan described in 
        section 1974(b) or for other purposes.
            ``(2) Periodic reassessment.--The determination that an 
        individual is an individual with disabilities shall be 
        considered to be effective under the State plan for a period of 
        not more than 6 months (or for such longer period in such cases 
        as a significant change in an individual's condition that may 
        affect such determination is unlikely). A reassessment shall be 
        made if there is a significant change in an individual's 
        condition that may affect such determination.
    ``(c) Eligibility Criteria.--The Secretary shall reassess the 
validity of the eligibility criteria described in subsection (a) as new 
knowledge regarding the assessments of functional disabilities becomes 
available. The Secretary shall report to the Committee on Finance of 
the Senate and the Committees on Ways and Means and Energy and Commerce 
of the House of Representatives on its findings under the preceding 
sentence as determined appropriate by the Secretary.
    ``(d) Activity of Daily Living Defined.--For purposes of this part, 
the term `activity of daily living' means any of the following: eating, 
toileting, dressing, bathing, and transferring.

``SEC. 1974. HOME AND COMMUNITY-BASED SERVICES COVERED UNDER STATE 
              PLAN.

    ``(a) Specification.--
            ``(1) In general.--Subject to the succeeding provisions of 
        this section, the State plan under this part shall specify--
                    ``(A) the home and community-based services 
                available under the plan to individuals with 
                disabilities (or to such categories of such 
                individuals), and
                    ``(B) any limits with respect to such services.
            ``(2) Flexibility in meeting individual needs.--Subject to 
        subsection (e)(2), such services may be delivered in an 
        individual's home, a range of community residential 
        arrangements, or outside the home.
    ``(b) Requirement for Care Management.--
            ``(1) In general.--The State shall make available to each 
        category of individuals with disabilities care management 
        services that at a minimum include--
                    ``(A) a comprehensive assessment of the 
                individual's need for home and community-based services 
                (regardless of whether all needed services are 
                available under the plan),
                    ``(B) an individualized plan of care based on such 
                assessment,
                    ``(C) arrangements for the provision of such 
                services, and
                    ``(D) monitoring of the delivery of services.
            ``(2) Care management services.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), the care management services 
                described in paragraph (1) shall be provided by a 
                public or private entity that is not providing home and 
                community-based services under this part.
                    ``(B) Exception.--A person who provides home and 
                community-based services under this part may provide 
                care management services if--
                            ``(i) the State determines that there is an 
                        insufficient pool of entities willing to 
                        provide such services in an area due to a low 
                        population of individuals eligible for home and 
                        community-based services under this part 
                        residing in such area; and
                            ``(ii) the State plan specifies procedures 
                        that the State will implement in order to avoid 
                        conflicts of interest.
            ``(3) Comprehensive assessments.--The Secretary shall 
        develop a uniform comprehensive assessment tool that shall be 
        used by the States under paragraph (1)(A). Alternative 
        comprehensive assessment tools may be used by the States only 
        with the approval of the Secretary. The Secretary shall provide 
        guidance to the States with regard to the appropriate 
        qualifications for individuals who conduct comprehensive 
        assessments.
            ``(4) Individualized plan of care.--
                    ``(A) In general.--The plan of care under paragraph 
                (1)(B) shall--
                            ``(i) specify which services included under 
                        the individual plan will be provided under the 
                        State plan under this part,
                            ``(ii) identify (to the extent possible) 
                        how the individual will be provided any 
                        services specified under the plan of care and 
                        not provided under the State plan,
                            ``(iii) specify how the provision of 
                        services to the individual under the plan will 
                        be coordinated with the provision of other 
                        health care services to the individual, and
                            ``(iv) be reviewed and updated every 6 
                        months (or more frequently if there is a change 
                        in the individual's condition).
                The State shall make reasonable efforts to identify and 
                arrange for services described in clause (ii). Nothing 
                in this subsection shall be construed as requiring a 
                State (under the State plan or otherwise) to provide 
                all the services specified in such a plan.
                    ``(B) Involvement of individuals.--The 
                individualized plan of care under paragraph (1)(B) for 
                an individual with disabilities shall--
                            ``(i) be developed by qualified individuals 
                        (specified under the State plan),
                            ``(ii) be developed and implemented in 
                        close consultation with the individual or the 
                        individual's designated representative, and
                            ``(iii) be approved by the individual (or 
                        the individual's designated representative).
    ``(c) Mandatory Coverage of Personal Assistance Services.--The 
State plan shall include, in the array of services made available to 
each category of individuals with disabilities, both agency-
administered and consumer-directed personal assistance services (as 
defined in subsection (g)).
    ``(d) Additional Services.--
            ``(1) Types of services.--Subject to subsection (e), 
        services available under a State plan under this part may 
        include any (or all) of the following:
                    ``(A) Homemaker and chore assistance.
                    ``(B) Home modifications.
                    ``(C) Respite services.
                    ``(D) Assistive devices, as defined in the 
                Technology Related Assistance for Individuals with 
                Disabilities Act.
                    ``(E) Adult day services.
                    ``(F) Habilitation and rehabilitation.
                    ``(G) Supported employment.
                    ``(H) Home health services.
                    ``(I) Transportation.
                    ``(J) Any other care or assistive services 
                specified by the State and approved by the Secretary 
                that will help individuals with disabilities to remain 
                in their homes and communities.
            ``(2) Criteria for selection of services.--The State 
        electing services under paragraph (1) shall specify in the 
        State plan--
                    ``(A) the methods and standards used to select the 
                types, and the amount, duration, and scope, of services 
                to be covered under the plan and to be available to 
                each category of individuals with disabilities, and
                    ``(B) how the types, and the amount, duration, and 
                scope, of services specified, within the limits of 
                available funding, provide substantial assistance in 
                living independently to individuals within each of the 
                categories of individuals with disabilities.
    ``(e) Exclusions and Limitations.--
            ``(1) In general.--A State plan may not provide for 
        coverage of--
                    ``(A) room and board,
                    ``(B) services furnished in a hospital, nursing 
                facility, intermediate care facility for the mentally 
                retarded, or other institutional setting specified by 
                the Secretary,
                    ``(C) items and services to the extent coverage is 
                provided for the individual under a health plan or the 
                medicare program, or
                    ``(D) the services described in paragraph (2) with 
                respect to an individual who is eligible for medical 
                assistance consisting of such services under the State 
                plan under part A.
            ``(2) Medicaid services described.--The services described 
        in this paragraph are the following:
                    ``(A) Personal care services (as described in 
                section 1905(a)(24)).
                    ``(B) Private duty nursing services (as referred to 
                in section 1905(a)(8)).
                    ``(C) Home or community-based services furnished 
                under a waiver granted under subsection (c), (d), or 
                (e) of section 1915.
                    ``(D) Home and community care furnished to 
                functionally disabled elderly individuals under section 
                1929.
                    ``(E) Community supported living arrangements 
                services under section 1930.
                    ``(F) Case-management services (as described in 
                section 1915(g)(2)).
                    ``(G) Home health care services (as referred to in 
                section 1905(a)(7)).
                    ``(H) Clinic services and rehabilitation services 
                that are furnished to an individual who has a condition 
                or disability that qualifies the individual to receive 
                any of the services described in subparagraph (F).
            ``(3) State maintenance of effort regarding medicaid 
        eligibility and covered services.--
                    ``(A) In general.--A State plan under this part 
                shall provide that the State will, during the time that 
                the State is furnishing home and community-based 
                services under this part, continue to make available 
                under the State plan under part A to the classes or 
                categories of individuals described in subparagraph (B) 
                any of the services described in paragraph (2) that 
                were available to such classes or categories of 
                individuals during the fiscal year immediately 
                preceding the fiscal year in which the State first 
                submits a State plan for approval under this part.
                    ``(B) Classes or categories of individuals.--The 
                classes or categories of individuals described in this 
                subparagraph are any classes or categories of 
                individuals who were eligible for medical assistance 
                consisting of any of the services described in 
                paragraph (2) during the fiscal year immediately 
                preceding the fiscal year in which the State first 
                submits a State plan for approval under this part.
    ``(f) Payment for Services.--In order to pay for covered services, 
a State plan may provide for the use of--
            ``(1) vouchers,
            ``(2) cash payments directly to individuals with 
        disabilities,
            ``(3) capitation payments to health plans, and
            ``(4) payment to providers.
    ``(g) Personal Assistance Services.--
            ``(1) In general.--For purposes of this part, the term 
        `personal assistance services' means those services specified 
        under the State plan as personal assistance services and shall 
        include at least hands-on and standby assistance, supervision, 
        and cueing with activities of daily living, whether agency-
        administered or consumer-directed (as defined in paragraph 
        (2)).
            ``(2) Consumer-directed.--For purposes of this part:
                    ``(A) In general.--The term `consumer-directed' 
                means, with reference to personal assistance services 
                or the provider of such services, services that are 
                provided by an individual who is selected and managed 
                (and, at the option of the service recipient, trained) 
                by the individual receiving the services.
                    ``(B) State responsibilities.--A State plan shall 
                ensure that where services are provided in a consumer-
                directed manner, the State shall create or contract 
                with an entity, other than the consumer or the 
                individual provider, to--
                            ``(i) inform both recipients and providers 
                        of rights and responsibilities under all 
                        applicable Federal labor and tax law; and
                            ``(ii) assume responsibility for providing 
                        effective billing, payments for services, tax 
                        withholding, unemployment insurance, and 
                        workers' compensation coverage, and act as the 
                        employer of the home care provider.
                    ``(C) Right of consumers.--Notwithstanding the 
                State responsibilities described in subparagraph (B), 
                service recipients, and, where appropriate, their 
                designated representative, shall retain the right to 
                independently select, hire, terminate, and direct 
                (including manage, train, schedule, and verify services 
                provided) the work of a home care provider.
            ``(3) Agency administered.--For purposes of this part, the 
        term `agency-administered' means, with respect to such 
        services, services that are not consumer-directed.

``SEC. 1975. COST SHARING.

    ``(a) No Cost Sharing for Poorest.--
            ``(1) In general.--The State plan may not impose any cost 
        sharing for individuals with income (as determined under 
        subsection (d)) less than 125 percent of the official poverty 
        level (referred to in paragraph (2)) applicable to a family of 
        the size involved.
            ``(2) Official poverty level.--The term `applicable poverty 
        level' means, for a family for a year, the official poverty 
        line (as defined by the Office of Management and Budget, and 
        revised annually in accordance with section 673(2) of the 
        Omnibus Budget Reconciliation Act of 1981) applicable to a 
        family of the size involved.
    ``(b) Sliding Scale for Remainder.--
            ``(1) Required coinsurance.--The State plan shall impose 
        cost sharing in the form of coinsurance (based on the amount 
        paid under the State plan for a service)--
                    ``(A) at a rate of 10 percent for individuals with 
                disabilities with income not less than 125 percent, and 
                less than 175 percent, of such official poverty line 
                (as so applied);
                    ``(B) at a rate of 15 percent for such individuals 
                with income not less than 175 percent, and less than 
                225 percent, of such official poverty line (as so 
                applied);
                    ``(C) at a rate of 25 percent for such individuals 
                with income not less than 225 percent, and less than 
                275 percent, of such official poverty line (as so 
                applied);
                    ``(D) at a rate of 30 percent for such individuals 
                with income not less than 275 percent, and less than 
                325 percent, of such official poverty line (as so 
                applied); and
                    ``(E) at a rate of 35 percent for such individuals 
                with income equal to at least 325 percent of such 
                official poverty line (as so applied).
            ``(2) Required annual deductible.--The State plan shall 
        impose cost sharing in the form of an annual deductible--
                    ``(A) of $100 for individuals with disabilities 
                with income not less than 125 percent, and less than 
                175 percent, of such official poverty line (as so 
                applied);
                    ``(B) of $200 for such individuals with income not 
                less than 175 percent, and less than 225 percent, of 
                such official poverty line (as so applied);
                    ``(C) of $300 for such individuals with income not 
                less than 225 percent, and less than 275 percent, of 
                such official poverty line (as so applied);
                    ``(D) of $400 for such individuals with income not 
                less than 275 percent, and less than 325 percent, of 
                such official poverty line (as so applied); and
                    ``(E) of $500 for such individuals with income 
                equal to at least 325 percent of such official poverty 
                line (as so applied).
    ``(c) Recommendation of the Secretary.--The Secretary shall make 
recommendations to the States as to how to reduce cost-sharing for 
individuals with extraordinary out-of-pocket costs for whom the cost-
sharing provisions of this section could jeopardize their ability to 
take advantage of the services offered under this part. The Secretary 
shall establish a methodology for reducing the cost-sharing burden for 
individuals with exceptionally high out-of-pocket costs under this 
part.
    ``(d) Determination of Income for Purposes of Cost Sharing.--The 
State plan shall specify the process to be used to determine the income 
of an individual with disabilities for purposes of this section. Such 
standards shall include a uniform Federal definition of income and any 
allowable deductions from income.

``SEC. 1976. QUALITY ASSURANCE AND SAFEGUARDS.

    ``(a) Quality Assurance.--
            ``(1) In general.--The State plan shall specify how the 
        State will ensure and monitor the quality of services, 
        including--
                    ``(A) safeguarding the health and safety of 
                individuals with disabilities,
                    ``(B) setting the minimum standards for agency 
                providers and how such standards will be enforced,
                    ``(C) setting the minimum competency requirements 
                for agency provider employees who provide direct 
                services under this part and how the competency of such 
                employees will be enforced,
                    ``(D) setting minimum competency requirements for 
                consumer directed providers of personal assistance 
                services and how such competency requirements will be 
                demonstrated,
                    ``(E) obtaining meaningful consumer input, 
                including consumer surveys that measure the extent to 
                which participants receive the services described in 
                the plan of care and participant satisfaction with such 
                services,
                    ``(F) establishing a process to receive, 
                investigate, and resolve allegations of neglect and/or 
                abuse,
                    ``(G) establishing optional training programs for 
                individuals with disabilities in the use and direction 
                of consumer directed providers of personal assistance 
                services,
                    ``(H) establishing an appeals procedure for 
                eligibility denials and a grievance procedure for 
                disagreements with the terms of an individualized plan 
                of care;
                    ``(I) providing for participation in quality 
                assurance activities, and
                    ``(J) specifying the role of the long-term care 
                ombudsman (under the Older Americans Act of 1965) and 
                the Protection and Advocacy Agency (under the 
                Developmental Disabilities Assistance and Bill of 
                Rights Act) in assuring quality of services and 
                protecting the rights of individuals with disabilities.
            ``(2) Issuance of regulations.--Not later than 1 year after 
        the date of enactment of this part, the Secretary shall issue 
        regulations implementing the quality provisions of this 
        subsection.
    ``(b) Federal Standards.--The State plan shall adhere to Federal 
quality standards in the following areas:
            ``(1) Case review of a specified sample of client records.
            ``(2) The mandatory reporting of abuse, neglect, or 
        exploitation.
            ``(3) The development of a registry of provider agencies or 
        home care workers and consumer directed providers of personal 
        assistance services against whom any complaints have been 
        sustained, which shall be available to the public.
            ``(4) Sanctions to be imposed on States or providers, 
        including disqualification from the program, if minimum 
        standards are not met.
            ``(5) Surveys of client satisfaction.
            ``(6) State optional training programs for informal 
        caregivers.
    ``(c) Safeguards.--
            ``(1) Confidentiality.--The State plan shall provide 
        safeguards which restrict the use or disclosure of information 
        concerning applicants and beneficiaries to purposes directly 
        connected with the administration of the plan.
            ``(2) Safeguards against abuse.--The State plans shall 
        provide safeguards against physical, emotional, or financial 
        abuse or exploitation (specifically including appropriate 
        safeguards in cases where payment for program benefits is made 
        by cash payments or vouchers given directly to individuals with 
        disabilities). All providers of services shall be required to 
        register with the State agency.
    ``(d) Specified Rights.--The State plan shall provide that in 
furnishing home and community-based services under the plan the 
following individual rights are protected:
            ``(1) The right to be fully informed in advance, orally and 
        in writing, of the care to be provided, to be fully informed in 
        advance of any changes in care to be provided, and (except with 
        respect to an individual determined incompetent) to participate 
        in planning care or changes in care.
            ``(2) The right to--
                    ``(A) voice grievances with respect to services 
                that are (or fail to be) furnished without 
                discrimination or reprisal for voicing grievances,
                    ``(B) be told how to complain to State and local 
                authorities, and
                    ``(C) prompt resolution of any grievances or 
                complaints.
            ``(3) The right to confidentiality of personal and clinical 
        records and the right to have access to such records.
            ``(4) The right to privacy and to have one's property 
        treated with respect.
            ``(5) The right to refuse all or part of any care and to be 
        informed of the likely consequences of such refusal.
            ``(6) The right to education or training for oneself and 
        for members of one's family or household on the management of 
        care.
            ``(7) The right to be free from physical or mental abuse, 
        corporal punishment, and any physical or chemical restraints 
        imposed for purposes of discipline or convenience and not 
        included in an individual's plan of care.
            ``(8) The right to be fully informed orally and in writing 
        of the individual's rights.
            ``(9) The right to a free choice of providers.
            ``(10) The right to direct provider activities when an 
        individual is competent and willing to direct such activities.

``SEC. 1977. ADVISORY GROUPS.

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

``SEC. 1978. PAYMENTS TO STATES.

    ``(a) In General.--Subject to section 1972(a)(9)(C) (relating to 
limitation on payment for administrative costs), the Secretary, in 
accordance with the Cash Management Improvement Act, shall authorize 
payment to each State with a plan approved under this part, for each 
quarter (beginning on or after January 1, 1998), from its allotment 
under section 1979(b), an amount equal to--
            ``(1) the Federal home and community-based services 
        matching percentage (as defined in subsection (b)) of amount 
        demonstrated by State claims to have been expended during the 
        quarter for home and community-based services under the plan 
        for individuals with disabilities; plus
            ``(2) an amount equal to 90 percent of the amount 
        demonstrated by the State to have been expended during the 
        quarter for quality assurance activities under the plan; plus
            ``(3) an amount equal to 90 percent of amount expended 
        during the quarter under the plan for activities (including 
        preliminary screening) relating to determination of eligibility 
        and performance of needs assessment; plus
            ``(4) an amount equal to 90 percent (or, beginning with 
        quarters in fiscal year 2003, 75 percent) of the amount 
        expended during the quarter for the design, development, and 
        installation of mechanical claims processing systems and for 
        information retrieval; plus
            ``(5) an amount equal to 50 percent of the remainder of the 
        amounts expended during the quarter as found necessary by the 
        Secretary for the proper and efficient administration of the 
        State plan.
    ``(b) Federal Home and Community-Based Services Matching 
Percentage.--In subsection (a), the term `Federal home and community-
based services matching percentage' means, with respect to a State, the 
State's Federal medical assistance percentage (as defined in section 
1905(b)) increased by 15 percentage points, except that the Federal 
home and community-based services matching percentage shall in no case 
be less than 65 percent or more than 90 percent.
    ``(c) Payments on Estimates with Retrospective Adjustments.--The 
method of computing and making payments under this section shall be as 
follows:
            ``(1) The Secretary shall, prior to the beginning of each 
        quarter, estimate the amount to be paid to the State under 
        subsection (a) for such quarter, based on a report filed by the 
        State containing its estimate of the total sum to be expended 
        in such quarter, and such other information as the Secretary 
        may find necessary.
            ``(2) From the allotment available therefore, the Secretary 
        shall provide for payment of the amount so estimated, reduced 
        or increased, as the case may be, by any sum (not previously 
        adjusted under this section) by which the Secretary finds that 
        the estimate of the amount to be paid the State for any prior 
        period under this section was greater or less than the amount 
        which should have been paid.
    ``(d) Application of Rules Regarding Limitations on Provider-
Related Donations and Health Care Related Taxes.--The provisions of 
section 1903(w) shall apply to payments to States under this section in 
the same manner as they apply to payments to States under section 
1903(a).
    ``(e) Failure to Comply with State Plan.--If a State furnishing 
home and community-based services under this part fails to comply with 
the State plan approved under this part, the Secretary may withhold an 
amount of funds determined appropriate by the Secretary from any 
payment to the State under this section.

``SEC. 1979. TOTAL FEDERAL BUDGET; ALLOTMENTS TO STATES.

    ``(a) Total Federal Budget.--The total Federal budget for State 
plans under this part for any fiscal year beginning on or after October 
1, 1997, is an amount equal to the sum of--
            ``(1) the amount of funds deposited in the Long-Term Care 
        Account of the Health Security Trust Fund established under 
        section 9551 of the Internal Revenue Code of 1986 for such 
        fiscal year; and
            ``(2) any funds in such account that were not expended in 
        any preceding fiscal year.
    ``(b) Allotments to States.--
            ``(1) In general.--The Secretary shall allot to each State 
        for each fiscal year an amount that bears the same ratio to the 
        total Federal budget for the fiscal year (specified under 
        subsection (a)) as the State allotment factor (under paragraph 
        (2) for the State for the fiscal year) bears to the sum of such 
        factors for all States for that fiscal year.
            ``(2) State allotment factor.--
                    ``(A) In general.--For each State for each fiscal 
                year, the Secretary shall compute a State allotment 
                factor equal to the sum of--
                            ``(i) the base allotment factor (specified 
                        in subparagraph (B)), and
                            ``(ii) the low income allotment factor 
                        (specified in subparagraph (C)).
                    ``(B) Base allotment factor.--The base allotment 
                factor, specified in this subparagraph, for a State for 
                a fiscal year is equal to the product of the following:
                            ``(i) Number of individuals with 
                        disabilities.--The number of individuals with 
                        disabilities in the State (determined under 
                        paragraph (3)) for the fiscal year.
                            ``(ii) 80 percent of the national per 
                        capita budget.--80 percent of the national 
                        average per capita budget amount (determined 
                        under paragraph (4)) for the fiscal year.
                            ``(iii) Wage adjustment factor.--The wage 
                        adjustment factor (determined under paragraph 
                        (5)) for the State for the fiscal year.
                            ``(iv) Federal home and community-based 
                        services matching percentage.--The Federal home 
                        and community-based services matching 
                        percentage (determined under section 1978(b)) 
                        for the fiscal year.
                    ``(C) Low income allotment factor.--The low income 
                allotment factor, specified in this subparagraph, for a 
                State for a fiscal year is equal to the product of the 
                following:
                            ``(i) Number of individuals with 
                        disabilities.--The number of individuals with 
                        disabilities in the State (determined under 
                        paragraph (3)) for the fiscal year.
                            ``(ii) 10 percent of the national per 
                        capita budget.--10 percent of the national 
                        average per capita budget amount (determined 
                        under paragraph (4)) for the fiscal year.
                            ``(iii) Wage adjustment factor.--The wage 
                        adjustment factor (determined under paragraph 
                        (5)) for the State for the fiscal year.
                            ``(iv) Federal home and community-based 
                        services matching percentage.--The Federal home 
                        and community-based services matching 
                        percentage (determined under section 1978(b)) 
                        for the fiscal year.
                            ``(v) Low income index.--The low income 
                        index (determined under paragraph (6)) for the 
                        State for the preceding fiscal year.
            ``(3) Number of individuals with disabilities.--The number 
        of individuals with disabilities in a State for a fiscal year 
        shall be determined as follows:
                    ``(A) Base.--The Secretary shall determine the 
                number of individuals in the State by age, sex, and 
                income category, based on the 1990 decennial census, 
                adjusted (as appropriate) by the March 1996 current 
                population survey.
                    ``(B) Disability prevalence level by population 
                category.--The Secretary shall determine, for each such 
                age, sex, and income category, the national average 
                proportion of the population of such category that 
                represents individuals with disabilities. The Secretary 
                may conduct periodic surveys in order to determine such 
                proportions.
                    ``(C) Base disabled population in a state.--The 
                number of individuals with disabilities in a State in 
                1996 is equal to the sum of the products, for such each 
                age, sex, and income category, of--
                            ``(i) the population of individuals in the 
                        State in the category (determined under 
                        subparagraph (A)), and
                            ``(ii) the national average proportion for 
                        such category (determined under subparagraph 
                        (B)).
                    ``(D) Update.--The Secretary shall determine the 
                number of individuals with disabilities in a State in a 
                fiscal year equal to the number determined under 
                subparagraph (C) for the State increased (or decreased) 
                by the percentage increase (or decrease) in the 
                disabled population of the State as determined under 
                the current population survey from 1996 to the year 
                before the fiscal year involved.
            ``(4) National per capita budget amount.--The national 
        average per capita budget amount, for a fiscal year, is--
                    ``(A) the total Federal budget specified under 
                subsection (a) for the fiscal year; divided by
                    ``(B) the sum, for the fiscal year, of the numbers 
                of individuals with disabilities (determined under 
                paragraph (3)) for all the States for the fiscal year.
            ``(5) Wage adjustment factor.--The wage adjustment factor, 
        for a State for a fiscal year, is equal to the ratio of--
                    ``(A) the average hourly wages for service workers 
                (other than household or protective services) in the 
                State, to
                    ``(B) the national average hourly wages for service 
                workers (other than household or protective services).
        The hourly wages shall be determined under this paragraph based 
        on data from the most recent decennial census for which such 
        data are available.
            ``(6) Low income index.--The low income index for each 
        State for a fiscal year is the ratio, determined for the 
        preceding fiscal year, of--
                    ``(A) the percentage of the State's population that 
                has income below 150 percent of the poverty level, to
                    ``(B) the percentage of the population of the 
                United States that has income below 150 percent of the 
                poverty level.
        Such percentages shall be based on data from the most recent 
        decennial census for which such data are available, adjusted by 
        data from the most recent current population survey as 
        determined appropriate by the Secretary.
            ``(7) No duplicate payment.--No payment may be made to a 
        State under this section for any services provided to an 
        individual to the extent that the State received payment for 
        such services under section 1903(a).
    ``(c) Carry-Over.--With respect to fiscal years 1998 through 2005, 
a State shall be permitted to carry-over not more than 25 percent of 
the allotment of such State for expenditures in the subsequent year.
    ``(d) State Entitlement.--This part constitutes budget authority in 
advance of appropriations Acts, and represents the obligation of the 
Federal Government to provide for the payment to States of amounts 
described in subsection (a).

``SEC. 1980. FEDERAL EVALUATIONS.

    ``Not later than December 31, 2003, December 31, 2006, and each 
December 31 thereafter, the Secretary shall provide to Congress 
analytical reports that evaluate--
            ``(1) the extent to which individuals with low incomes and 
        disabilities are equitably served;
            ``(2) the adequacy and equity of service plans to 
        individuals with similar levels of disability across States;
            ``(3) the comparability of program participation across 
        States, described by level and type of disability; and
            ``(4) the ability of service providers to sufficiently meet 
        the demand for services.''.
    (b) Conforming Amendment.--Title XIX of the Social Security Act (42 
U.S.C. 1396 et seq.), as amended by section 301, is amended by striking 
the title inserting the following:

 ``TITLE XIX--MEDICAL ASSISTANCE PROGRAMS, STATE PROGRAMS FOR PREMIUM 
AND COST-SHARING ASSISTANCE, AND STATE PROGRAMS FOR HOME AND COMMUNITY-
                           BASED SERVICES''.

                      Subtitle D--Medicaid Program

PART I--INTEGRATION OF CERTAIN MEDICAID ELIGIBLES INTO REFORMED HEALTH 
                              CARE SYSTEM

SEC. 671. LIMITING COVERAGE UNDER MEDICAID OF ITEMS AND SERVICES 
              COVERED UNDER STANDARD BENEFITS PACKAGE.

    (a) In General.--Title XIX (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:

   ``treatment of items and services in the standard benefits package

    ``Sec. 1931. (a) Items and Services Covered Under Standard Benefits 
Package.--Except as provided in subsection (c), a State plan under this 
part shall not provide medical assistance consisting of payment for 
items and services in the standard benefits package described in 
section 21201(a).
    ``(b) Medical Assistance Not Affected.--Subsection (a) shall not be 
construed as--
            ``(1) affecting the eligibility of any individual for 
        medical assistance consisting of payment for items and services 
        not covered under the standard benefits package;
            ``(2) affecting the amount, duration, and scope of any 
        medical assistance consisting of payment for the items and 
        services described in paragraph (1); or
            ``(3) prohibiting payment of medical assistance for items 
        and services covered under the standard benefits package to the 
        extent that the items and services under this part exceed the 
        items and services covered under such package with respect to 
        amount, duration, and scope.
    ``(c) Exceptions.--
            ``(1) In general.--Subsection (a) shall not affect the 
        provision of medical assistance consisting of payment for items 
        and services in the standard benefits package--
                    ``(A) which are provided to--
                            ``(i) except as provided in paragraph (2), 
                        an individual eligible for medical assistance 
                        under the State plan who is not a premium 
                        subsidy eligible individual (as defined in 
                        section 1952(a)(2));
                            ``(ii) an individual with respect to whom 
                        supplemental security income benefits are being 
                        paid under title XVI; and
                            ``(iii) an individual who is eligible for 
                        benefits under part A of title XVIII; or
                    ``(B) which consist of emergency services to 
                certain aliens under section 1903(v)(2).
            ``(2) Special rule.--With respect to the first year in 
        which the eligibility percentage for premium assistance under 
        section 1952(a)(2)(B) equals 200 percent and any succeeding 
        year, subsection (a) shall apply to an individual who is not a 
        premium subsidy eligible individual because the individual's 
        family income determined under section 1958(2) exceeds 200 
        percent of the poverty line (as defined in section 1958(5)).
    ``(d) State Maintenance of Effort.--
            ``(1) In general.--
                    ``(A) Reduction in quarterly payments.--For any 
                calendar quarter in an applicable year (as defined in 
                subparagraph (B)), the amount otherwise payable to a 
                State under section 1903 for the quarter shall be 
                reduced by the State maintenance of effort amount for 
                the quarter determined under paragraph (2).
                    ``(B) Applicable year.--For purposes of this 
                paragraph, the term `applicable year' means 1996 and 
                any succeeding year.
            ``(2) Maintenance of effort amount.--
                    ``(A) In general.--The maintenance of effort amount 
                for a State for a calendar quarter in an applicable 
                year shall be equal to 25 percent of the State's base 
                payment amount (determined under subparagraph (B)), 
                multiplied by the inflation index (described in 
                subparagraph (C)(i)) and the State population index 
                (described in subparagraph (C)(ii)).
                    ``(B) State base payment amount.--The base payment 
                amount for a State for an applicable year shall be an 
                amount, as determined by the Secretary, equal to the 
                total expenditures from State funds made under the 
                State plan during fiscal year 1994 with respect to 
                medical assistance consisting of items and services of 
                the type included in the standard benefits package for 
                individuals who would not have received such medical 
                assistance if the provisions of this section and part B 
                (as in effect in the applicable year) had been in 
                effect in fiscal year 1994.
                    ``(C) Indexes.--
                            ``(i) Inflation index.--
                                    ``(I) In general.--For purposes of 
                                this paragraph, the Secretary shall 
                                establish a cumulative inflation index 
                                for the applicable year which equals 1 
                                plus the product of--
                                            ``(aa) the percentage 
                                        change in the national per 
                                        capita health expenditures plus 
                                        the applicable percentage 
                                        points (determined under 
                                        subclause (II)); multiplied by
                                            ``(bb) the cumulative level 
                                        of the index for the preceding 
                                        year.
                                    ``(II) Applicable percentage 
                                points.--For purposes of subclause (I), 
                                the applicable percentage points are--
                                            ``(aa) for each of years 
                                        1995 through 1997, 1;
                                            ``(bb) for 1998, .8;
                                            ``(cc) for 1999, .6;
                                            ``(dd) for 2000, .4;
                                            ``(ee) for 2001, .2; and
                                            ``(ff) for succeeding 
                                        years, 0.
                                    ``(III) Base year.--The base year 
                                for the inflation index under this 
                                clause is 1994.
                            ``(ii) State population index.--For 
                        purposes of this paragraph, the Secretary shall 
                        establish a State population index where the 
                        level of the index is equal to 1 plus the 
                        cumulative percentage change in the number of 
                        individuals residing in a State from 1994 
                        through December 31 of the year preceding the 
                        applicable year.''.
    (b) No Federal Financial Participation.--Section 1903(i) (42 U.S.C. 
1396b(i)) is amended--
            (1) by striking ``or'' at the end of paragraph (14),
            (2) by striking the period at the end of paragraph (15) and 
        inserting ``; or'', and
            (3) by inserting after paragraph (15) the following new 
        paragraph:
            ``(16) with respect to items and services covered under the 
        standard benefits package described in section 21201(a) for 
        individuals to whom section 1931(a) applies.''.
    (c) Effective Date.--The amendments made by this section shall 
apply with respect to items or services furnished in a State on or 
after January 1, 1996.

   PART II--COORDINATED CARE SERVICES FOR DISABLED MEDICAID ELIGIBLES

SEC. 672. COORDINATED CARE SERVICES FOR DISABLED MEDICAID ELIGIBLES.

    (a) State Expenditures Limited to Certified Health Plans.--Section 
1903(m) (42 U.S.C. 1396b) is amended by adding at the end the following 
new paragraph:
            ``(7) No payment shall be made under this part to a State 
        with respect to expenditures incurred by the State for payment 
        for services provided by an entity with a contract under this 
        subsection unless such entity is a certified standard health 
        plan (as defined in section 21011(a)(2)).''.
    (b) Modification to 75/25 Rule.--Section 1903(m)(2)(A)(ii) (42 
U.S.C. 1396b(m)(2)(A)(ii)) is amended by striking ``75 percent'' and 
inserting ``50 percent''.
    (c) Effective Date.--The amendments made by this section shall 
become effective with respect to payments for calendar quarters 
beginning on or after January 1, 1996.

     PART III--PAYMENTS TO HOSPITALS SERVING VULNERABLE POPULATIONS

SEC. 673. REPLACEMENT OF DSH PAYMENT PROVISIONS WITH PROVISIONS 
              RELATING TO PAYMENTS TO HOSPITALS SERVING VULNERABLE 
              POPULATIONS.

    (a) Amendments to Provisions Requiring States to Make DSH Payment 
Adjustments.--
            (1) Adjustments to national dsh payment limit.--Section 
        1923(f)(1)(B) (42 U.S.C. 1396r-4(f)(1)(B)) is amended to read 
        as follows:
                    ``(B) National dsh payment limit.--
                            ``(i) In general.--Except as provided in 
                        clause (ii), the national DSH payment limit for 
                        a fiscal year is equal to 12 percent of the 
                        total amount of expenditures under the State 
                        plans under this part for medical assistance 
                        during the fiscal year.
                            ``(ii) Reduction in limit.--For fiscal 
                        years during which the eligibility percentage 
                        for premium assistance under section 
                        1952(a)(2)(B)--
                                    ``(I) equals or exceeds 125 percent 
                                but is less than 150 percent, `10 
                                percent' shall be substituted for `12 
                                percent' in clause (i);
                                    ``(II) equals or exceeds 150 
                                percent but is less than 175 percent, 
                                `8 percent' shall be substituted for 
                                `12 percent' in clause (i);
                                    ``(III) equals or exceeds 175 
                                percent but is less than 200 percent, 
                                `6 percent' shall be substituted for 
                                `12 percent' in clause (i); and
                                    ``(IV) equals 200 percent, `4 
                                percent' shall be substituted for `12 
                                percent' in clause (i).
            (2) Adjustments to state allotment limits.--Section 
        1923(f)(2)(B) (42 U.S.C. 1396r-4(f)(2)(B)) is amended to read 
        as follows:
                    ``(B) Exceptions.--
                            ``(i) In general.--Except as provided in 
                        clause (ii), a State DSH allotment under 
                        subparagraph (A) for a fiscal year shall not 
                        exceed 12 percent of the total amount of 
                        expenditures under the State plan for medical 
                        assistance during the fiscal year.
                            ``(ii) Reduction in limit.--For fiscal 
                        years during which the eligibility percentage 
                        for premium assistance under section 
                        1952(a)(2)(B)--
                                    ``(I) equals or exceeds 125 percent 
                                but is less than 150 percent, `10 
                                percent' shall be substituted for `12 
                                percent' in clause (i);
                                    ``(II) equals or exceeds 150 
                                percent but is less than 175 percent, 
                                `8 percent' shall be substituted for 
                                `12 percent' in clause (i);
                                    ``(III) equals or exceeds 175 
                                percent but is less than 200 percent, 
                                `6 percent' shall be substituted for 
                                `12 percent' in clause (i); and
                                    ``(IV) equals 200 percent, `4 
                                percent' shall be substituted for `12 
                                percent' in clause (i).
            (3) Elimination of high dsh states and state supplemental 
        amounts.--
                    (A) In general.--Section 1923(f)(2)(A) (42 U.S.C. 
                1396r-4(f)(2)(A)) is amended to read as follows:
                    ``(A) In general.--Subject to subparagraph (B), the 
                State DSH allotment for a fiscal year is equal to the 
                State DSH allotment for the previous fiscal year 
                increased by the State growth factor (as defined in 
                paragraph (3)(B)) for the fiscal year.''.
                    (B) Conforming amendments.--(i) Section 1923(f) (42 
                U.S.C. 1396r-4(f)) is amended by striking paragraph (3) 
                and redesignating paragraph (4) as paragraph (3).
                    (ii) Section 1923(f)(3) (42 U.S.C. 1396r-4(f)(3)), 
                as redesignated by clause (i), is amended by striking 
                subparagraphs (A) and (C) and redesignating 
                subparagraphs (B), (D), and (E) as subparagraphs (A), 
                (B), and (C).
                    (iii) Section 1923(f)(3)(B) (42 U.S.C. 1396r-
                4(f)(3)(B)), as redesignated by clauses (i) and (ii), 
                is amended to read as follows:
                    ``(B) State growth amount.--The term `State growth 
                amount' means, with respect to a State for a fiscal 
                year, the product of the State growth factor and the 
                State DSH payment limit for the previous fiscal 
                year.''.
                    (iv) Section 1923(f)(1)(A) (42 U.S.C. 1396r-
                4(f)(1)(A) is amended by striking ``(as defined in 
                paragraph (4)(B))'' and inserting ``(as defined in 
                paragraph (3)(A))''.
            (3) Termination of requirement on states to make dsh 
        payment adjustments.--Section 1923 (42 U.S.C. 1396r-4) is 
        amended by adding at the end the following new subsection:
    ``(h) Termination of Requirement to Make Payment Adjustments.--
            ``(1) In general.--Any requirement imposed by this section 
        on a State to increase the rate or amount of payment for 
        inpatient hospital services provided by a hospital which serves 
        a disproportionate number of low income patients with special 
        needs shall terminate in the year described in paragraph (2).
            ``(2) Year described.--The year described in this paragraph 
        is the first year beginning after the year in which the 
        eligibility percentage for premium assistance under section 
        1952(a)(2)(B) equals 200 percent.''.
            (4) No federal financial participation.--Section 1903(i) 
        (42 U.S.C. 1396b(i)), as amended by section 671(b), is 
        amended--
            (1) by striking ``or'' at the end of paragraph (15),
            (2) by striking the period at the end of paragraph (16) and 
        inserting ``; or'', and
            (3) by inserting after paragraph (16) the following new 
        paragraph:
            ``(17) during or after the year described in section 
        1923(h)(2) with respect to any payment made by a State to a 
        hospital which serves a disproportionate number of low income 
        patients with special needs that is in excess of the payment 
        otherwise required under this part.''.
            (5) Effective date.--The amendments made by this section 
        shall be effective for calendar quarters beginning on or after 
        October 1, 1997.
    (b) Payments to Hospitals Serving Vulnerable Populations.--Title 
XIX, as amended by sections 301 and 667, is amended by adding at the 
end the following new part:

     ``PART D--PAYMENTS TO HOSPITALS SERVING VULNERABLE POPULATIONS

``SEC. 1991. PAYMENTS TO HOSPITALS.

    ``(a) Entitlement Status.--The Secretary shall make payments in 
accordance with this part to eligible hospitals described in section 
1992. The preceding sentence constitutes budget authority in advance of 
appropriations Acts and represents the obligation of the Federal 
Government to provide funding for such payments in the amounts, and for 
the fiscal years, specified in subsection (b).
    ``(b) Amount of Entitlement.--For purposes of subsection (a), the 
amounts and fiscal years specified in this subsection are (in the 
aggregate for all eligible hospitals) $2,500,000,000 for the first 
applicable fiscal year (as defined in section 1994) and for each 
subsequent fiscal year.
    ``(c) Payments Made on Quarterly Basis.--Payments to an eligible 
hospital under this section for a year shall be made on a quarterly 
basis during the year.

``SEC. 1992. IDENTIFICATION OF ELIGIBLE HOSPITALS.

    ``(a) Hospitals in Participating States.--In order to be an 
eligible hospital under this part, a hospital must be located in a 
State that is a participating State under title XXI.
    ``(b) State Identification.--In accordance with the criteria 
described in subsection (c) and such procedures as the Secretary may 
require, each State shall identify the hospitals in the State that meet 
such criteria and provide the Secretary with a list of such hospitals.
    ``(c) Criteria for Eligibility.--A hospital meets the criteria 
described in this subsection if the hospital's low-income utilization 
rate for the base year under section 1923(b)(3) (as such section is in 
effect on the day before the date of the enactment of this part) is not 
less than 25 percent.

``SEC. 1993. AMOUNT OF PAYMENTS.

    ``(a) In General.--The total amount available for payments under 
this part in a year shall be allocated to hospitals for low-income 
assistance in accordance with this subsection.
    ``(b) Determination of Hospital Payment Amount.--The amount of 
payment to an eligible hospital during a year shall be the equal to the 
hospital's low-income percentage (as defined in subsection (c)) of the 
total amount available for payments under this part for the year.
    ``(c) Low-Income Percentage Defined.--
            ``(1) In general.--For purposes of this section, an 
        eligible hospital's `low-income percentage' for a year is equal 
        to the amount (expressed as a percentage) of the total low-
        income days for all eligible hospitals for the year that are 
        attributable to the hospital.
            ``(2) Low-income days described.--For purposes of paragraph 
        (1), an eligible hospital's low-income days for a year shall be 
        equal to the product of--
                    ``(A) the total number of inpatient days for the 
                hospital for the year (as reported to the Secretary by 
                the State in which the hospital is located, in 
                accordance with a reporting schedule and procedures 
                established by the Secretary); and
                    ``(B) the hospital's low-income utilization rate 
                for the base year under section 1923(b)(3) (as such 
                section is in effect on the day before the date of the 
                enactment of this part).

``SEC. 1994. DEFINITIONS.

    ``For purposes of this part:
            ``(1) Base year.--The term `base year' means 1995.
            ``(2) First applicable fiscal year--The term `first 
        applicable fiscal year' means first fiscal year that begins 
        after the fiscal year in which the eligibility percentage for 
        premium assistance under section 1952(a)(2)(B) equals 200 
        percent.''
    (c) Conforming Amendment.--Title XIX (42 U.S.C. 1396 et seq.), as 
amended by sections 301 and 667, is amended by striking the title 
inserting the following:

  ``TITLE XIX--MEDICAL ASSISTANCE PROGRAMS, PROGRAMS FOR PREMIUM AND 
    COST-SHARING ASSISTANCE, PROGRAMS FOR HOME AND COMMUNITY-BASED 
 SERVICES, AND PAYMENTS TO HOSPITALS SERVING VULNERABLE POPULATIONS''.

              PART IV--MEDICAID LONG-TERM CARE PROVISIONS

SEC. 674. PAYMENTS FOR HOME OR COMMUNITY-BASED CARE, PERSONAL CARE 
              SERVICES, AND FRAIL ELDERLY SERVICES.

    (a) In General.--
            (1) Payment.--Section 1903(a) (42 U.S.C. 1396b(a)) is 
        amended--
                    (A) by striking the period at the end of paragraph 
                (7) and inserting ``; plus''; and
                    (B) by adding at the end the following new 
                paragraph:
            ``(8) an amount equal to the Federal home or community-
        based care matching percentage (as defined in section 1905(t)) 
        of the total amount expended during such quarter for home or 
        community-based services furnished under a waiver under 
        subsection (c) or (d) of section 1915, personal care services 
        described in section 1905(a)(24), and home and community care 
        for functionally disabled elderly individuals under section 
        1929.''.
            (2) Federal home or community-based care matching 
        percentage.--Section 1905 (42 U.S.C. 1396d) is amended by 
        adding at the end the following new subsection:
    ``(t) The term `Federal home or community-based care matching 
percentage' means, with respect to a State, the State's Federal medical 
assistance percentage (as defined in subsection (b)) increased by 10 
percentage points.''.
    (b) Effective Date.--The amendments made by subsection (a) shall 
apply to payments for medical assistance for calendar quarters 
beginning on or after January 1, 1995.

SEC. 675. INCREASED RESOURCE DISREGARD FOR INDIVIDUALS RECEIVING 
              CERTAIN SERVICES.

    (a) In general.--Section 1902(a)(10) (42 U.S.C. 1396a(a)(10)) is 
amended--
            (1) by striking ``and'' at the end of subparagraph (E);
            (2) by adding ``and'' at the end of subparagraph (F); and
            (3) by adding at the end the following new subparagraph:
                    ``(G) provide that, in determining the eligibility 
                of any unmarried individual who has applied for or is 
                receiving medical assistance consisting of community-
                based services furnished under a waiver under 
                subsection (c) or (d) of section 1915, personal care 
                services described in section 1905(a)(24), or home and 
                community care for functionally disabled elderly 
                individuals under section 1929, the first $4,000 of 
                resources may, at the option of the State, be 
                disregarded.''.
    (b) Effective Date.--The amendments made by subsection (a) shall 
apply to payments for medical assistance for calendar quarters 
beginning on or after January 1, 1995.

SEC. 676. FRAIL ELDERLY DEMONSTRATION PROJECT WAIVERS.

    (a) Expansion of Number of Waivers.--Section 9412(b)(1) of the 
Omnibus Budget Reconciliation Act of 1986 is amended by striking ``15'' 
and inserting ``40''.
    (b) Development of Protocols and Model Certification Guidelines.--
Section 9412(b) of the Omnibus Budget Reconciliation Act of 1986 is 
amended by adding at the end the following new paragraphs:
            ``(5) The Secretary, in consultation with the States and 
        organizations operating projects in accordance with waivers 
        under this subsection shall develop and publish a waiver 
        protocol that will establish minimum standard requirements that 
        an organization must meet to be eligible for a waiver under 
        this subsection. In developing the protocol under the preceding 
        sentence, the Secretary shall incorporate standards for 
        organizations to deliver integrated acute and long-term care 
        services for the elderly, children, and young adults.
            ``(6) The Secretary shall develop model guidelines that 
        shall be available to States that choose to establish a 
        comprehensive procedure for the licensure and certification of 
        an organization operating a demonstration project under a 
        waiver granted pursuant to this subsection. Such guidelines 
        shall encompass the range of services provided by such an 
        organization.
    (c) Evaluations and Reports.--Section 9412(b) of the Omnibus Budget 
Reconciliation Act of 1986, as amended by subsection (b), is amended by 
adding at the end the following new paragraph:
            ``(7)(A) The Secretary shall develop standard evaluation 
        protocols to assess the cost-effectiveness and quality of 
        service provided under--
                    ``(i) demonstration projects operating on the date 
                of the enactment of this paragraph under waivers 
                granted pursuant to this subsection; and
                    ``(ii) demonstration projects granted waivers after 
                the date of the enactment of this paragraph.
            ``(B) The Secretary shall conduct evaluations of the 
        demonstration projects in accordance with the protocols 
        developed under subparagraph (A) and based on the results of 
        such evaluations, report to the Committee on Finance of the 
        Senate, the Committee on Ways and Means of the House of 
        Representatives, and the Subcommittee on Health and the 
        Environment of the Committee on Energy and Commerce of the 
        House of Representatives by--
                    ``(i) not later than January 1, 1998, with respect 
                to demonstration projects described in subparagraph 
                (A)(i); and
                    ``(ii) not later than January 1, 2003, with respect 
                to demonstration projects described in subparagraph 
                (A)(ii);
        on the desirability of granting permanent status under titles 
        XVIII and XIX of the Social Security Act to such demonstration 
        projects that the Secretary has determined to be successful.''.
    (d) Effective Date.--The amendments made by this section shall take 
effect on the date of the enactment of this Act.

SEC. 677. ELIMINATION OF REQUIREMENT OF PRIOR INSTITUTIONALIZATION WITH 
              RESPECT TO HABILITATION SERVICES FURNISHED UNDER A WAIVER 
              FOR HOME OR COMMUNITY-BASED SERVICES.

    (a) In General.--Section 1915(c)(5) (42 U.S.C. 1396n(c)(5)) is 
amended in the matter preceding subparagraph (A) by striking ``, with 
respect to individuals who receive such services after discharge from a 
nursing facility or intermediate care facility for the mentally 
retarded''.
    (b) Effective Date.--The amendments made by this section shall 
apply to services furnished on or after January 1, 1995.

SEC. 678. ELIMINATION OF RULE REGARDING AVAILABILITY OF BEDS IN CERTAIN 
              INSTITUTIONS.

    (a) In General.--The first sentence of section 1915(c)(1) (42 
U.S.C. 1396n(c)(1)) is amended by inserting the following before the 
end period: ``(at the option of the State, such determination may be 
made without regard to the availability of beds in such a hospital, 
nursing facility, or intermediate care facility for the mentally 
retarded located in the State)''.
    (b) Effective Date.--The amendment made by subsection (a) shall be 
effective with respect to waivers granted or renewed on or after 
January 1, 1995.

                         PART V--MISCELLANEOUS

SEC. 679. MEDICAID COVERAGE OF ALL CERTIFIED NURSE PRACTITIONER AND 
              CLINICAL NURSE SPECIALIST SERVICES.

    (a) In General.--Paragraph (21) of section 1905(a) (42 U.S.C. 
1396d(a)) is amended to read as follows:
            ``(21) services furnished by all certified nurse 
        practitioners (as defined by the Secretary) or clinical nurse 
        specialists (as defined in subsection (u)) which the certified 
        nurse practitioner or clinical nurse specialist is legally 
        authorized to perform under State law (or the State regulatory 
        mechanism provided by State law), whether or not the certified 
        nurse practitioner or clinical nurse specialist is under the 
        supervision of, or associated with, a physician or other health 
        care provider;''.
    (b) Clinical Nurse Specialist Defined.--Section 1905 (42 U.S.C. 
1396), as amended by section 674, is amended by adding at the end the 
following new subsection:
    ``(u) The term `clinical nurse specialist' means an individual 
who--
            ``(1) is a registered nurse and is licensed to practice 
        nursing in the State in which the clinical nurse specialist 
        services are performed; and
            ``(2) holds a master's degree in a defined clinical area of 
        nursing from an accredited educational institution.''.
    (c) Effective Date.--The amendments made by this section shall 
become effective with respect to payments for calendar quarters 
beginning on or after January 1, 1995.

                     TITLE VII--REVENUE PROVISIONS

SEC. 700. 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--Financing Provisions

              PART I--INCREASE IN TAX ON TOBACCO PRODUCTS

SEC. 701. 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 ``$62 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 ``$130.20 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 ``$51.13 per thousand'', and
            (2) by striking ``equal to'' and all that follows in 
        paragraph (2) and inserting ``equal to 66 percent of the price 
        for which sold but not more than $155 per thousand.''
    (c) Cigarette Papers.--Subsection (c) of section 5701 is amended by 
striking ``0.75 cent (0.625 cent on cigarette papers removed during 
1991 or 1992)'' and inserting ``3.88 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 ``7.76 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 
        ``$13.69'', and
            (2) by striking ``12 cents (10 cents on chewing tobacco 
        removed during 1991 or 1992)'' in paragraph (2) and inserting 
        ``$5.45''.
    (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 ``$17.35''.
    (g) Application of Tax Increase to Puerto Rico.--Section 5701 is 
amended by adding at the end the following new subsection:
    ``(h) Application to Taxes to Puerto Rico.--Notwithstanding 
subsections (b) and (c) of section 7653 and any other provision of 
law--
            ``(1) In general.--On tobacco products and cigarette papers 
        and tubes, manufactured or imported into the Commonwealth of 
        Puerto Rico, there is hereby imposed a tax at the rate equal to 
        the excess of--
                    ``(A) the rate of tax applicable under this section 
                to like articles manufactured in the United States, 
                over
                    ``(B) the rate referred to in subparagraph (A) as 
                in effect on the day before the date of the enactment 
                of the Health Security Act.
            ``(2) Shipments to puerto rico from the united states.--
        Only the rates of tax in effect on the day before the date of 
        the enactment of this subsection shall be taken into account in 
        determining the amount of any exemption from, or credit or 
        drawback of, any tax imposed by this section on any article 
        shipped to the Commonwealth of Puerto Rico from the United 
        States.
            ``(3) Shipments from puerto rico to the united states.--The 
        rates of tax taken into account under section 7652(a) with 
        respect to tobacco products and cigarette papers and tubes 
        coming into the United States from the Commonwealth of Puerto 
        Rico shall be the rates of tax in effect on the day before the 
        date of the enactment of the Health Security Act.
            ``(4) Disposition of revenues.--The provisions of section 
        7652(a)(3) shall not apply to any tax imposed by reason of this 
        subsection.''
    (h) Funding of Subsidies for Children and Pregnant Women.--Section 
5701 is amended by adding at the end the following new subsection:
    ``(i) Funding of Subsidies for Children and Pregnant Women.--In the 
case of articles removed after June 30, 1996, and before January 1, 
2002--
            ``(1) each of the following rates of tax shall be increased 
        by the amount determined in accordance with the following 
        table:

``For the tax under subsection:                        The increase is:
    (a)(1)........................................               $15.00
    (a)(2)........................................                37.40
    (b)(1)........................................                15.00
    (b)(2)........................................                31.50
    (e)(1)........................................                 4.00
    (e)(2)........................................                 1.60
    (f)...........................................                 5.00
    (g)...........................................                5.00,
            ``(2) the rate of tax under subsection (c) shall be 
        increased by 0.93 cent,
            ``(3) the rate of tax under subsection (d) shall be 
        increased by 1.86 cents, and
            ``(4) subsection (a)(2) shall be applied by substituting 
        `81.81 percent' for `66 percent'.''
    (i) Effective Date.--The amendments made by this section shall 
apply to articles removed (as defined in section 5702(k) of the 
Internal Revenue Code of 1986, as amended by this Act) after December 
31, 1994.
    (j) Floor Stocks Taxes.--
            (1) Imposition of tax.--On tobacco products and cigarette 
        papers and tubes manufactured in or imported into the United 
        States or the Commonwealth of Puerto Rico which are removed 
        before any tax-increase date, 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 any tax-increase date, 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) on each tax-increase date for which 
        such person is liable.
            (4) Liability for tax and method of payment.--
                    (A) Liability for tax.--A person holding cigarettes 
                on any tax-increase date, 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 the date which is 3 
                months after the tax-increase date.
            (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 any tax-increase date 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, as amended by this 
                Act.
                    (B) Secretary.--The term ``Secretary'' means the 
                Secretary of the Treasury or his delegate.
                    (C) Tax-increase date.--The term ``tax-increase 
                date'' means January 1, 1995, and July 1, 1996.
            (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. 702. 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). For 
purposes of this section, section 5704(d), section 5761, and such other 
provisions as the Secretary may specify by regulations, references to 
exportation shall be treated as including a reference to shipment to 
the Commonwealth of Puerto Rico.
    ``(b) Cross Reference.--

                                ``For penalty for the sale of tobacco 
products and cigarette papers and tubes in the United States which are 
labeled for export, see section 5761(c).''
            (B) The table of sections for subpart F of chapter 52 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), and 
        5763(b) and (c) are each amended by inserting ``or importer'' 
        after ``manufacturer''.
            (2) The heading of subsection (b) of section 5763 is 
        amended by inserting ``Qualified Importers,'' after 
        ``Manufacturers,''.
            (3) The heading for subchapter B of chapter 52 is amended 
        by inserting ``and Importers'' after ``Manufacturers''.
            (4) The item relating to subchapter B in the table of 
        subchapters for chapter 52 is amended by inserting ``and 
        importers'' after ``manufacturers''.
    (c) Repeal of Tax-Exempt Sales to Employees of Cigarette 
Manufacturers.--
            (1) Subsection (a) of section 5704 is amended--
                    (A) by striking ``Employee Use or'' in the heading, 
                and
                    (B) by striking ``for use or consumption by 
                employees or'' in the text.
            (2) Subsection (e) of section 5723 is amended by striking 
        ``for use or consumption by their employees, or for 
        experimental purposes'' and inserting ``for experimental 
        purposes''.
    (d) Repeal of Tax-Exempt Sales to United States.--Subsection (b) of 
section 5704 is amended by striking ``and manufacturers may similarly 
remove such articles for use of the United States;''.
    (e) Books of 25 or Fewer Cigarette Papers Subject to Tax.--
Subsection (c) of section 5701 is amended by striking ``On each book or 
set of cigarette papers containing more than 25 papers,'' and inserting 
``On cigarette papers,''.
    (f) Storage of Tobacco Products.--Subsection (k) of section 5702 is 
amended by inserting ``under section 5704'' after ``internal revenue 
bond''.
    (g) Authority To Prescribe Minimum Manufacturing Activity 
Requirements.--Section 5712 is amended by striking ``or'' at the end of 
paragraph (1), by redesignating paragraph (2) as paragraph (3), and by 
inserting after paragraph (1) the following new paragraph:
            ``(2) the activity proposed to be carried out at such 
        premises does not meet such minimum capacity or activity 
        requirements as the Secretary may prescribe, or''.
    (h) Special Rules Relating to Puerto Rico and the Virgin Islands.--
Section 7652 is amended by adding at the end the following new 
subsection:
    ``(h) Limitation on Cover Over of Tax on Tobacco Products.--For 
purposes of this section, with respect to taxes imposed under section 
5701 or this section on any tobacco product or cigarette paper or tube, 
the amount covered into the treasuries of Puerto Rico and the Virgin 
Islands shall not exceed the rate of tax under section 5701 in effect 
on the article on the day before the date of the enactment of the 
Health Security Act.''
    (i) Effective Date.--The amendments made by this section shall 
apply to articles removed (as defined in section 5702(k) of the 
Internal Revenue Code of 1986, as amended by this Act) after December 
31, 1994.

SEC. 703. IMPOSITION OF EXCISE TAX ON MANUFACTURE OR IMPORTATION OF 
              ROLL-YOUR-OWN TOBACCO.

    (a) In General.--Section 5701 (relating to rate of tax), as amended 
by section 701, is amended by redesignating subsections (g) and (h) as 
subsections (h) and (i) 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 $17.35 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 the 
        person's 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 December 31, 1994.
            (2) Transitional rule.--Any person who--
                    (A) on the date of the enactment of this Act is 
                engaged in business as a manufacturer of roll-your-own 
                tobacco or as an importer of tobacco products or 
                cigarette papers and tubes, and
                    (B) before January 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.

                  PART II--HEALTH RELATED ASSESSMENTS

SEC. 705. ASSESSMENTS ON INSURED AND SELF-INSURED HEALTH PLANS.

    (a) General Rule.--Subtitle D (relating to miscellaneous excise 
taxes) is amended by adding after chapter 36 the following new chapter:

                ``CHAPTER 37--HEALTH RELATED ASSESSMENTS

                              ``Subchapter A. Insured and self-insured 
                                        health plans.

         ``Subchapter A--Insured and Self-Insured Health Plans

                              ``Sec. 4501. Health insurance and health-
                                        related administrative 
                                        services.
                              ``Sec. 4502. Self-insured health plans.
                              ``Sec. 4503. Definitions and special 
                                        rules.

``SEC. 4501. HEALTH INSURANCE AND HEALTH-RELATED ADMINISTRATIVE 
              SERVICES.

    ``(a) Imposition of Tax.--There is hereby imposed--
            ``(1) on each taxable health insurance policy, a tax equal 
        to 1.75 percent of the premiums received under such policy, and
            ``(2) on each amount received for health-related 
        administrative services, a tax equal to 1.75 percent of the 
        amount so received.
    ``(b) Liability for Tax.--
            ``(1) Health insurance.--The tax imposed by subsection 
        (a)(1) shall be paid by the issuer of the policy.
            ``(2) Health-related administrative services.--The tax 
        imposed by subsection (a)(2) shall be paid by the person 
        providing the health-related administrative services.
    ``(c) Taxable Health Insurance Policy.--For purposes of this 
section--
            ``(1) In general.--Except as otherwise provided in this 
        section, the term `taxable health insurance policy' means any 
        insurance policy providing accident or health insurance with 
        respect to individuals residing in the United States.
            ``(2) Exemption of certain policies.--The term `taxable 
        health insurance policy' does not include any insurance policy 
        if substantially all of the coverage provided under such policy 
        relates to--
                    ``(A) liabilities incurred under workers' 
                compensation laws,
                    ``(B) tort liabilities,
                    ``(C) liabilities relating to ownership or use of 
                property,
                    ``(D) credit insurance, or
                    ``(E) such other similar liabilities as the 
                Secretary may specify by regulations.
            ``(3) Special rule where policy provides other coverage.--
        In the case of any taxable health insurance policy under which 
        amounts are payable other than for accident or health coverage, 
        in determining the amount of the tax imposed by subsection 
        (a)(1) on any premium paid under such policy, there shall be 
        excluded the amount of the charge for the nonaccident or health 
        coverage if--
                    ``(A) the charge for such nonaccident or health 
                coverage is either separately stated in the policy, or 
                furnished to the policyholder in a separate statement, 
                and
                    ``(B) such charge is reasonable in relation to the 
                total charges under the policy.
        In any other case, the entire amount of the premium paid under 
        such a policy shall be subject to tax under subsection (a)(1).
            ``(4) Treatment of prepaid health coverage arrangements.--
                    ``(A) In general.--In the case of any arrangement 
                described in subparagraph (B)--
                            ``(i) such arrangement shall be treated as 
                        a taxable health insurance policy,
                            ``(ii) the payments or premiums referred to 
                        in subparagraph (B)(i) shall be treated as 
                        premiums received for a taxable health 
                        insurance policy, and
                            ``(iii) the person referred to in 
                        subparagraph (B)(i) shall be treated as the 
                        issuer.
                    ``(B) Description of arrangements.--An arrangement 
                is described in this subparagraph if under such 
                arrangement--
                            ``(i) fixed payments or premiums are 
                        received as consideration for any person's 
                        agreement to provide or arrange for the 
                        provision of accident or health coverage to 
                        residents of the United States, regardless of 
                        how such coverage is provided or arranged to be 
                        provided, and
                            ``(ii) substantially all of the risks of 
                        the rates of utilization of services is assumed 
                        by such person or the provider of such 
                        services.
    ``(d) Health-Related Administrative Services.--For purposes of this 
section, the term `health-related administrative services' means--
            ``(1) the processing of claims or performance of other 
        administrative services in connection with accident or health 
        coverage under a taxable health insurance policy if the charge 
        for such services is not included in the premiums under such 
        policy, and
            ``(2) processing claims, arranging for provision of 
        accident or health coverage, or performing other administrative 
        services in connection with an applicable self-insured health 
        plan (as defined in section 4502(c)) established or maintained 
        by a person other than the person performing the services.
For purposes of paragraph (1), rules similar to the rules of subsection 
(c)(3) shall apply.

``SEC. 4502. SELF-INSURED HEALTH PLANS.

    ``(a) Imposition of Tax.--In the case of any applicable self-
insured health plan, there is hereby imposed a tax for each month equal 
to 1.75 percent of the sum of--
            ``(1) the accident or health coverage expenditures for such 
        month under such plan, and
            ``(2) the direct administrative expenditures for such month 
        under such plan.
    ``(b) Liability for Tax.--
            ``(1) In general.--The tax imposed by subsection (a) shall 
        be paid by the plan sponsor.
            ``(2) Plan sponsor.--For purposes of paragraph (1), the 
        term `plan sponsor' means--
                    ``(A) the employer in the case of a plan 
                established or maintained by a single employer,
                    ``(B) the employee organization in the case of a 
                plan established or maintained by an employee 
                organization, or
                    ``(C) in the case of--
                            ``(i) a plan established or maintained by 2 
                        or more employers or jointly by 1 or more 
                        employers and 1 or more employee organizations,
                            ``(ii) a voluntary employees' beneficiary 
                        association under section 501(c)(9), or
                            ``(iii) a plan described in subsection 
                        (c)(2)(E),
                the association, committee, joint board of trustees, or 
                other similar group of representatives of the parties 
                who establish or maintain the plan.
    ``(c) Applicable Self-Insured Health Plan.--For purposes of this 
section, the term `applicable self-insured health plan' means any plan 
for providing accident or health coverage if--
            ``(1) any portion of such coverage is provided other than 
        through an insurance policy, and
            ``(2) such plan is established or maintained--
                    ``(A) by one or more employers for the benefit of 
                their employees or former employees,
                    ``(B) by one or more employee organizations for the 
                benefit of their members or former members,
                    ``(C) jointly by 1 or more employers and 1 or more 
                employee organizations for the benefit of employees or 
                former employees,
                    ``(D) by a voluntary employees' beneficiary 
                association described in section 501(c)(9), or
                    ``(E) in the case of a plan not described in the 
                preceding subparagraphs, by a qualified association (as 
                defined in section 21433(c) of the Social Security 
                Act).
    ``(d) Accident or Health Coverage Expenditures.--For purposes of 
this section--
            ``(1) In general.--The accident or health coverage 
        expenditures of any applicable self-insured health plan for any 
        month are the aggregate expenditures paid in such month for 
        accident or health coverage provided under such plan to the 
        extent such expenditures are not subject to tax under section 
        4501.
            ``(2) Treatment of reimbursements.--In determining accident 
        or health coverage expenditures during any month of any 
        applicable self-insured health plan, reimbursements (by 
        insurance or otherwise) received during such month shall be 
        taken into account as a reduction in accident or health 
        coverage expenditures.
            ``(3) Certain expenditures disregarded.--Paragraph (1) 
        shall not apply to any expenditure for the acquisition or 
        improvement of land or for the acquisition or improvement of 
        any property to be used in connection with the provision of 
        accident or health coverage which is subject to the allowance 
        under section 167, except that, for purposes of paragraph (1), 
        allowances under section 167 shall be considered as 
        expenditures.
    ``(e) Direct Administrative Expenditures.--For purposes of this 
section, the term `direct administrative expenditures' means the 
administrative expenditures under the plan to the extent such 
expenditures are not subject to tax under section 4501. In determining 
the amount of such expenditures, rules similar to the rules of 
subsection (d)(3) shall apply.

``SEC. 4503. DEFINITIONS AND SPECIAL RULES.

    ``(a) Definitions.--For purposes of this subchapter--
            ``(1) Accident or health coverage.--The term `accident or 
        health coverage' means any coverage which, if provided by an 
        insurance policy, would cause such policy to be a taxable 
        health insurance policy (as defined in section 4501(c)).
            ``(2) Insurance policy.--The term `insurance policy' means 
        any policy or other instrument whereby a contract of insurance 
        is issued, renewed, or extended.
            ``(3) Premium.--The term `premium' means the gross amount 
        of premiums and other consideration (including advance 
        premiums, deposits, fees, and assessments) arising from 
        policies issued by a person acting as the primary insurer, 
        adjusted for any return or additional premiums paid as a result 
        of endorsements, cancellations, audits, or retrospective 
        rating. Amounts returned where the amount is not fixed in the 
        contract but depends on the experience of the insurer or the 
        discretion of management shall not be included in return 
        premiums.
            ``(4) United states.--The term `United States' includes any 
        possession of the United States.
    ``(b) Treatment of Governmental Entities.--
            ``(1) In general.--For purposes of this subchapter--
                    ``(A) the term `person' includes any governmental 
                entity, and
                    ``(B) notwithstanding any other law or rule of law, 
                governmental entities shall not be exempt from the 
                taxes imposed by this subchapter except as provided in 
                paragraph (2).
            ``(2) Exempt governmental programs.--In the case of an 
        exempt governmental program--
                    ``(A) no tax shall be imposed under section 4501 on 
                any premium received pursuant to such program or on any 
                amount received for health-related administrative 
                services pursuant to such program, and
                    ``(B) no tax shall be imposed under section 4502 on 
                any expenditures pursuant to such program.
            ``(3) Exempt governmental program.--For purposes of this 
        subchapter, the term `exempt governmental program' means--
                    ``(A) the insurance programs established by parts A 
                and B of title XVIII of the Social Security Act,
                    ``(B) the medical assistance program established by 
                title XIX of the Social Security Act,
                    ``(C) any program established by Federal law for 
                providing medical care (other than through insurance 
                policies) to individuals (or the spouses and dependents 
                thereof) by reason of such individuals being--
                            ``(i) members of the Armed Forces of the 
                        United States, or
                            ``(ii) veterans, and
                    ``(D) any program established by Federal law for 
                providing medical care (other than through insurance 
                policies) to members of Indian tribes (as defined in 
                section 4(d) of the Indian Health Care Improvement 
                Act).
    ``(c) No Cover Over to Possessions.--Notwithstanding any other 
provision of law, no amount collected under this subchapter shall be 
covered over to any possession of the United States.''
    (b) Clerical Amendment.--The table of chapters for subtitle D is 
amended by inserting after the item relating to chapter 36 the 
following new item:

                              ``Chapter 37. Health related 
                                        assessments.''
    (c) Effective Date.--The amendments made by this section shall 
apply with respect to premiums received, and expenses incurred, with 
respect to coverage for periods after December 31, 1995.

SEC. 706. TAX ON HIGH COST HEALTH PLANS.

    (a) In General.--Subchapter A of chapter 37 (relating to 
assessments on insured and self-insured health benefits), as added by 
section 705, is amended by adding at the end the following new part:

                   ``PART II--HIGH COST HEALTH PLANS

``Sec. 4511. Tax on high cost health plans.
``Sec. 4512. Definitions and special rules.

``SEC. 4511. TAX ON HIGH COST HEALTH PLANS.

    ``(a) Imposition of Tax.--If an applicable health plan is a high 
cost plan for any taxable period, there is hereby imposed a tax equal 
to 25 percent of the taxable amount with respect to the high cost plan 
for the period.
    ``(b) Liability for Tax.--
            ``(1) In general.--Except as provided in paragraph (2), the 
        tax imposed by subsection (a) shall be paid by the issuer of 
        the high cost plan.
            ``(2) Self-insured plans.--In the case of a high cost plan 
        which is a self-insured plan, the tax shall be paid by the plan 
        sponsor.
    ``(c) High Cost Plan.--For purposes of this section--
            ``(1) In general.--An applicable health plan is a high cost 
        plan for any taxable period if--
                    ``(A) the premiums received under the plan during 
                the taxable period, exceed
                    ``(B) the sum of the target amounts determined with 
                respect to each class of enrollment under the plan.
            ``(2) Target amount.--
                    ``(A) In general.--The target amount for any class 
                of enrollment under a plan for any taxable period is an 
                amount equal to the product of--
                            ``(i) the target premium for such class, 
                        and
                            ``(ii) the number of primary insureds in 
                        such class during the period.
                    ``(B) Proportionate reduction of target premium.--
                The target premium under subparagraph (A)(i) applicable 
                to an individual who was a primary insured for only a 
                portion of the taxable period shall be proportionately 
                reduced to reflect the period the individual was not a 
                primary insured.
            ``(3) Certain supplemental premiums included.--The amount 
        determined under paragraph (1)(A) shall include applicable 
        supplemental premiums.
            ``(4) Certain actuarial adjustments disregarded.--The 
        amount determined under paragraph (1)(A) (after application of 
        paragraph (3)) shall be adjusted, in accordance with 
        regulations, as follows:
                    ``(A) Age adjustments under community-rated 
                plans.--In the case of a community-rated plan, to 
                reflect the premiums which would have been received if 
                any age adjustment factor were disregarded.
                    ``(B) Risk adjustments under other plans.--In the 
                case of any plan which is not a community-rated plan, 
                by adjusting such amount so that it does not reflect 
                the relative risks among the participants in the plan.
            ``(5) Certain plans not treated as high cost plans.--
                    ``(A) In general.--An applicable health plan shall 
                not be treated as a high cost plan for any taxable 
                period beginning in a calendar year if its adjusted 
                average premium is determined, in such manner as the 
                Secretary may prescribe, to be in the bottom quartile 
                of the adjusted average premiums of all certified 
                standard health plans in the United States for the 
                calendar year.
                    ``(B) Adjusted average premium.--For purposes of 
                subparagraph (A), the adjusted average premium for any 
                plan shall be determined in such manner as the 
                Secretary shall prescribe and shall be equal to the 
                weighted average premium for all classes of enrollment 
                under the plan--
                            ``(i) adjusted to reflect--
                                    ``(I) differences in cost-of-living 
                                among community-rated areas,
                                    ``(II) other differences among 
                                community-rated areas which affect 
                                premium costs,
                                    ``(III) in the case of a community-
                                rated plan, age adjustment factors, and
                                    ``(IV) in the case of plans which 
                                are not community-rated plans, relative 
                                risks described in paragraph (4)(B), 
                                and
                            ``(ii) determined by taking into account 
                        applicable supplemental premiums under the 
                        plan.
    ``(d) Taxable Amount.--For purposes of this section, the term 
`taxable amount' means the excess (if any) which is determined under 
subsection (c)(1), except that in applying subsection (c) for purposes 
of this subsection, the reference premium shall be substituted for the 
target premium.
    ``(e) Target and Reference Premiums.--For purposes of this 
section--
            ``(1) In general.--As soon as practicable after the annual 
        open enrollment period established under section 21024 of the 
        Social Security Act for a community rating area, the Secretary 
        shall establish--
                    ``(A) separate target and reference premiums for 
                each class of enrollment under community-rated plans in 
                such area, and
                    ``(B) separate target and reference premiums for 
                each class of enrollment under plans which are not 
                community-rated plans in such area.
            ``(2) Basis for establishing premiums.--
                    ``(A) Target premiums.--The Secretary shall 
                establish target premiums under paragraph (1) for each 
                community rating area at the levels which the Secretary 
                estimates will result in the following plans being 
                treated as high cost plans (determined without regard 
                to subsection (c)(5)):
                            ``(i) Community-rated certified standard 
                        health plans in the area which cover 40 percent 
                        of the total primary insureds covered by all 
                        such plans in the area.
                            ``(ii) Certified standard health plans in 
                        the area which are not community-rated which 
                        cover 40 percent of the total primary insureds 
                        covered by all such plans in the area.
                    ``(B) Reference premiums.--The Secretary shall 
                establish reference premiums under paragraph (1) for 
                each community rating area which shall be equal to the 
                average premium per primary insured for all certified 
                standard health plans offered in the area for the class 
                of enrollment for which the premium is being 
                established.

``SEC. 4512. DEFINITIONS AND SPECIAL RULES.

    ``(a) Applicable Plans.--For purposes of this part--
            ``(1) Applicable health plan.--The term `applicable health 
        plan' means a certified standard health plan or a certified 
        nonstandard health plan.
            ``(2) Applicable supplemental premium.--The term 
        `applicable supplemental premium' means, with respect to any 
        issuer or plan sponsor of a certified standard health plan, any 
        premium received by the issuer or plan sponsor under a 
        certified supplemental health plan covering an individual who 
        is covered under the certified standard health plan.
    ``(b) Certified Health Plans.--For purposes of this part--
            ``(1) Certified standard health plan.--The term `certified 
        standard health plan' has the meaning given such term by 
        section 21011(a)(2) of the Social Security Act, except that 
        such term does not include a plan offering the alternative 
        standard benefit package described in subtitle C of such Act.
            ``(2) Certified nonstandard health plan.--The term 
        `certified nonstandard health plan' has the meaning given such 
        term by section 21011(a)(3) of such Act.
            ``(3) Certified supplemental health plan.--The term 
        `certified supplemental health plan' has the meaning given such 
        term by section 21011(a)(4) of such Act.
    ``(c) Community Rating Areas and Plans.--For purposes of this 
part--
            ``(1) Community rating area.--The term `community rating 
        area' means an area established under section 21021 of the 
        Social Security Act.
            ``(2) Community-rated plan.--The term `community-rated 
        plan' means a plan which is community-rated under section 21113 
        of such Act.
    ``(d) Premiums.--For purposes of this part--
            ``(1) In general.--The term `premium' has the meaning given 
        such term by section 4503(a)(3).
            ``(2) Administrative costs.--Amounts received for health-
        related administrative services (as defined in section 4501(d)) 
        provided in connection with any applicable health plan or any 
        certified supplemental health plan taken into account under 
        section 4511(c)(3) shall be treated as premiums.
            ``(3) Self-insured plans.--In the case of a self-insured 
        plan, premiums shall include--
                    ``(A) a reasonable estimate (actuarially determined 
                in such manner as the Secretary may prescribe) of the 
                expenditures described in subsections (d) and (e) of 
                section 4502 with respect to coverage under the plan, 
                and
                    ``(B) in the case of any coverage provided through 
                an insurance policy, premiums paid for such coverage.
    ``(e) Insurance Policy, Self-Insured Plans, and Plan Sponsor.--For 
purposes of this part--
            ``(1) Insurance policy.--The term `insurance policy' has 
        the meaning given such term by section 4503(a)(2).
            ``(2) Self-insured plan.--The term `self-insured plan' 
        means any certified standard health plan any portion of the 
        coverage of which is provided other than through an insurance 
        policy (including an arrangement described in section 
        4501(c)(4)(B)).
            ``(3) Plan sponsor.--The term `plan sponsor' has the 
        meaning given such term by section 4502(b)(2), except that in 
        the case of a plan not described in such section, such term 
        means the person or persons who establish or maintain the plan.
    ``(f) Taxable Period.--For purposes of this part--
            ``(1) In general.--The term `taxable period' means, with 
        respect to any applicable health plan in a community rating 
        area for any year, the 12-month period following the close of 
        the annual open enrollment period for such area under section 
        21024 of the Social Security Act for which an individual 
        enrolling during such enrollment period receives coverage under 
        the plan.
            ``(2) Special rule for multistate self-insured plans.--If 
        an applicable health plan in a community rating area has a 
        different annual open enrollment period than the one described 
        in paragraph (1), its taxable period for any year shall be 
        determined under paragraph (1) by reference to its first 
        coverage period beginning on or after the first day of the 
        coverage period for the enrollment period described in 
        paragraph (1).
    ``(g) Special Rules.--For purposes of this part--
            ``(1) Deposits.--The Secretary may require deposits of any 
        taxes imposed by section 4511 at such times as the Secretary 
        determines appropriate.
            ``(2) Governmental entities subject to tax.--The rules of 
        section 4503(b) shall apply for purposes of this part.
            ``(3) Plans covering more than 1 area.--If an applicable 
        health plan covers individuals residing in more than 1 
        community rating area, the individuals in each such area shall 
        be treated as covered by a separate plan.
            ``(4) No cover over to possessions.--Notwithstanding any 
        other provision of law, no amount collected under this part 
        shall be covered over to any possession of the United States.
    ``(h) Funding of Subsidies for Children and Pregnant Women.--In the 
case of taxable periods beginning after December 31, 1996, and before 
January 1, 2002, the rate of tax under section 4511(a) shall be 
increased by 4 percent.
    ``(i) Regulations.--The Secretary shall issue such regulations as 
are necessary to carry out the provisions of this part, including 
regulations--
            ``(1) requiring the maintenance of such records, and the 
        reporting of such information as the Secretary determines 
        necessary, and
            ``(2) which provide that 2 or more plans of a person or any 
        related persons must be aggregated, or a plan must be treated 
        as 2 or more separate plans.''
    (b) Tax Not Deductible.--Section 275(a) (relating to disallowance 
of deductions for certain taxes) is amended by adding at the end the 
following new paragraph:
            ``(7) Taxes imposed by section 4511 (relating to taxes on 
        high cost health plans).''
    (c) Conforming Amendments.--
            (1) Subchapter A of chapter 37, as added by section 705, is 
        amended by inserting after the subchapter heading the 
        following:

                              ``Part I.   Premium and related 
                                        assessments.
                              ``Part II.  High cost health plans.

              ``PART I--PREMIUM AND RELATED ASSESSMENTS''.

            (2) Section 4503, as so added, is amended by striking 
        ``subchapter'' each place it appears and inserting ``part''.
    (d) Effective Date.--The amendments made by this section shall take 
effect on January 1, 1996.

          PART III--RECAPTURE OF CERTAIN HEALTH CARE SUBSIDIES

SEC. 711. RECAPTURE OF CERTAIN HEALTH CARE SUBSIDIES RECEIVED BY HIGH-
              INCOME INDIVIDUALS.

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

  ``PART VIII--CERTAIN HEALTH CARE SUBSIDIES RECEIVED BY HIGH-INCOME 
                              INDIVIDUALS

                              ``Sec. 59B. Recapture of certain health 
                                        care subsidies.

``SEC. 59B. RECAPTURE OF CERTAIN HEALTH CARE SUBSIDIES.

    ``(a) Imposition of Recapture Amount.--In the case of an 
individual, if the modified adjusted gross income of the taxpayer for 
the taxable year exceeds the threshold amount, such taxpayer shall pay 
(in addition to any other amount imposed by this subtitle) a recapture 
amount for such taxable year equal to the aggregate of the Medicare 
part B recapture amounts (if any) for months during such year that a 
premium is paid under part B of title XVIII of the Social Security Act 
for the coverage of the individual under such part.
    ``(b) Medicare Part B Premium Recapture Amount for Month.--For 
purposes of this section, the Medicare part B premium recapture amount 
for any month is the amount equal to the excess of--
            ``(1) 150 percent of the monthly actuarial rate for 
        enrollees age 65 and over determined for that calendar year 
        under section 1839(b) of the Social Security Act, over
            ``(2) the total monthly premium under section 1839 of the 
        Social Security Act (determined without regard to subsections 
        (b) and (f) of section 1839 of such Act).
    ``(c) Phase-in of Recapture Amount.--
            ``(1) In general.--If the modified adjusted gross income of 
        the taxpayer for any taxable year exceeds the threshold amount 
        by less than $15,000, the recapture amount imposed by this 
        section for such taxable year shall be an amount which bears 
        the same ratio to the recapture amount which would (but for 
        this subsection) be imposed by this section for such taxable 
        year as such excess bears to $15,000.
            ``(2) Joint returns.--If a recapture amount is determined 
        separately for each spouse filing a joint return, paragraph (1) 
        shall be applied by substituting `$30,000' for `$15,000' each 
        place it appears.
    ``(d) Other Definitions and Special Rules.--For purposes of this 
section--
            ``(1) Threshold amount.--The term `threshold amount' 
        means--
                    ``(A) except as otherwise provided in this 
                paragraph, $90,000,
                    ``(B) $115,000 in the case of a joint return, and
                    ``(C) zero in the case of a taxpayer who--
                            ``(i) is married (as determined under 
                        section 7703) but does not file a joint return 
                        for such year, and
                            ``(ii) does not live apart from his spouse 
                        at all times during the taxable year.
            ``(2) Modified adjusted gross income.--The term `modified 
        adjusted gross income' means adjusted gross income--
                    ``(A) determined without regard to sections 135, 
                911, 931, and 933, and
                    ``(B) increased by the amount of interest received 
                or accrued by the taxpayer during the taxable year 
                which is exempt from tax.
            ``(3) Joint returns.--In the case of a joint return--
                    ``(A) the recapture amount under subsection (a) 
                shall be the sum of the recapture amounts determined 
                separately for each spouse, and
                    ``(B) subsections (a) and (c) shall be applied by 
                taking into account the combined modified adjusted 
                gross income of the spouses.
            ``(4) Coordination with other provisions.--
                    ``(A) Treated as tax for subtitle f.--For purposes 
                of subtitle F, the recapture amount imposed by this 
                section shall be treated as if it were a tax imposed by 
                section 1.
                    ``(B) Not treated as tax for certain purposes.--The 
                recapture amount imposed by this section shall not be 
                treated as a tax imposed by this chapter for purposes 
                of determining--
                            ``(i) the amount of any credit allowable 
                        under this chapter, or
                            ``(ii) the amount of the minimum tax under 
                        section 55.
                    ``(C) Treated as payment for medical insurance.--
                The recapture amount imposed by this section shall be 
                treated as an amount paid for insurance covering 
                medical care, within the meaning of section 213(d).
            ``(5) Taxes imposed by possessions.--The tax imposed by 
        this section shall not apply to a bona fide resident of a 
        possession with respect to which the requirements of section 
        21026 of the Social Security Act are met.''
    (b) Transfers to Federal Supplementary Medical Insurance Trust 
Fund.--
            (1) In general.--There are hereby appropriated to the 
        Federal Supplementary Medical Insurance Trust Fund amounts 
        equivalent to the aggregate increase in liabilities under 
        chapter 1 of the Internal Revenue Code of 1986 which is 
        attributable to the application of section 59B(a) of such Code, 
        as added by this section.
            (2) Transfers.--The amounts appropriated by paragraph (1) 
        to the Federal Supplementary Medical Insurance Trust Fund shall 
        be transferred from time to time (but not less frequently than 
        quarterly) from the general fund of the Treasury on the basis 
        of estimates made by the Secretary of the Treasury of the 
        amounts referred to in paragraph (1). Any quarterly payment 
        shall be made on the first day of such quarter and shall take 
        into account the recapture amounts referred to in such section 
        59B(a) 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) (relating to returns 
        relating to social security benefits) is amended by striking 
        ``and'' at the end of subparagraph (B) and by inserting after 
        subparagraph (C) the following new subparagraph:
                    ``(D) the number of months during the calendar year 
                for which a premium was paid under part B of title 
                XVIII of the Social Security Act for the coverage of 
                such individual under such part, and''.
            (2) Paragraph (2) of section 6050F(b) is amended to read as 
        follows:
            ``(2) the information required to be shown on such return 
        with respect to such individual.''
            (3) Subparagraph (A) of section 6050F(c)(1) is amended by 
        inserting before the comma ``and in the case of the information 
        specified in subsection (a)(1)(D)''.
            (4) The heading for section 6050F is amended by inserting 
        ``and medicare part b 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 part B 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 health care 
                                        subsidies received by high-
                                        income individuals.''
    (f) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1995.

                       PART IV--OTHER PROVISIONS

SEC. 715. INCREASE IN TAX ON CERTAIN HOLLOW POINT AND LARGE CALIBER 
              HANDGUN AMMUNITION.

    (a) Increase in Manufacturers Tax.--
            (1) In general.--Section 4181 (relating to imposition of 
        tax on firearms) is amended--
                    (A) by striking ``Shells, and cartridges'' and 
                inserting ``Shells and cartridges not taxable at 10,000 
                percent'', and
                    (B) by adding at the end the following:
            ``Articles taxable at 10,000 percent.--
                    ``Any jacketed, hollow point projectile which may 
                be used in a handgun and the jacket of which is 
                designed to produce, upon impact, sharp-tipped, barb-
                like projections that extend beyond the diameter of the 
                unfired projectile.
                    ``Any cartridge with a projectile measuring .500 
                inch or greater in diameter which may be used in a 
                handgun.''
            (2) Additional taxes added to the general fund.--Section 
        3(a) of the Act of September 2, 1937 (16 U.S.C. 669b(a)), 
        commonly referred to as the ``Pittman-Robertson Wildlife 
        Restoration Act'', is amended by adding at the end the 
        following new sentence: ``There shall not be covered into the 
        fund the portion of the tax imposed by such section 4181 that 
        is attributable to any increase in amounts received in the 
        Treasury under such section by reason of the amendments made by 
        section 715(a)(1) of the Health Security Act, as estimated by 
        the Secretary.''
    (b) Effective Dates.--
            (1) In general.--The amendments made by this section shall 
        apply to sales after December 31, 1994.
            (2) Floor stocks tax.--
                    (A) In general.--In the case of any article held on 
                January 1, 1995, which is taxable under section 4181 of 
                the Internal Revenue Code of 1986 on and after such 
                date at a tax rate of 10,000 percent, there is hereby 
                imposed a tax equal to the excess of--
                            (i) the tax which would be imposed under 
                        section 4181 of such Code if the article were 
                        sold on such date, over
                            (ii) the prior tax (if any) imposed under 
                        such section on such article.
                    (B) Credit.--Each person shall be allowed as a 
                credit against the taxes imposed by subparagraph (A) an 
                amount equal to the taxes imposed on articles which 
                such person destroys (in such manner as the Secretary 
                may prescribe) after December 31, 1994, and before 
                April 1, 1995.
                    (C) Payment.--The taxes imposed by subparagraph (A) 
                on any article shall be paid by the person holding the 
                article on January 1, 1995. Such taxes shall be paid 
                before April 1, 1995, in such manner as the Secretary 
                of the Treasury may prescribe.
                    (D) 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 
                January 1, 1995, shall be subject to the tax imposed by 
                subparagraph (A) if--
                            (i) 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
                            (ii) such article is held on such date 
                        under the supervision of a customs officer 
                        pursuant to the 2d proviso of such section 
                        3(a).
                    (E) Controlled groups.--Rules similar to the rules 
                of section 5061(e)(3) of such Code shall apply for 
                purposes of this paragraph.
                    (F) Other laws applicable.--All provisions of law, 
                including penalties, applicable with respect to the 
                taxes imposed by section 4181 of such Code shall, 
                insofar as applicable and not inconsistent with the 
                provisions of this subsection, apply to the floor 
                stocks taxes imposed by subparagraph (A), to the same 
                extent as if such taxes were imposed by such section 
                4181. The Secretary may treat any person who bore the 
                ultimate burden of the tax imposed by subparagraph (A) 
                as the person to whom a credit or refund under such 
                provisions may be allowed or made.

SEC. 716. MODIFICATION TO SELF-EMPLOYMENT TAX TREATMENT OF CERTAIN S 
              CORPORATION SHAREHOLDERS AND PARTNERS.

    (a) Treatment of Certain S Corporation Shareholders.--
            (1) Amendment to internal revenue code.--Section 1402 
        (relating to definitions) is amended by adding at the end the 
        following new subsection:
    ``(k) Treatment of Certain S Corporation Shareholders.--
            ``(1) In general.--In the case of any individual--
                    ``(A) who is a 2-percent shareholder (as defined in 
                section 1372(b)) of an S corporation for any taxable 
                year of such corporation, and
                    ``(B) who provides significant services to or on 
                behalf of such S corporation during such taxable year,
        such shareholder's net earnings from self-employment shall 
        include 80 percent of such shareholder's pro rata share (as 
        determined under section 1366(a)) of the taxable income or loss 
        of such corporation for such taxable year from service-related 
        businesses carried on by such corporation, and to the extent 
        provided in regulations, for any other taxable year to the 
        extent attributable to such services.
            ``(2) Certain exceptions to apply.--In determining the 
        amount to be taken into account under paragraph (1), the 
        exceptions provided in subsection (a) shall apply, except that, 
        in the case of the exceptions provided in subsection (a)(5), 
        rules similar to the rules of subparagraph (B) thereof shall 
        apply to shareholders in S corporations.
            ``(3) Service-related business.--For purposes of this 
        subsection, the term `service-related business' means--
                    ``(A) any trade or business involving the 
                performance of services in the fields of health (other 
                than with respect to inpatient personal care 
                facilities), law, engineering, architecture, 
                accounting, actuarial services, performing arts, 
                consulting, athletics, or financial services (other 
                than lending or brokerage services), or
                    ``(B) any other trade or business with respect to 
                which the Secretary determines that capital is an 
                insignificant income-producing factor.
            ``(4) Application of deferred compensation rules.--For 
        purposes of subchapter D of chapter 1 (and any other provision 
        of this title relating thereto), in the case of an individual 
        who is treated as having net earnings from self-employment by 
        reason of paragraph (1)--
                    ``(A) such individual shall not be treated as a 
                self-employed individual (within the meaning of section 
                401(c)(1)) with respect to services performed for the S 
                corporation, and
                    ``(B) such net earnings shall be treated as 
                compensation received by the individual as an employee 
                of the S corporation.''
            (2) Amendment to social security act.--Section 211 of the 
        Social Security Act is amended by adding at the end the 
        following new subsection:

           ``Treatment of Certain S Corporation Shareholders

    ``(k)(1) In the case of any individual--
            ``(A) who is a 2-percent shareholder (as defined in section 
        1372(b) of the Internal Revenue Code of 1986) of an S 
        corporation for any taxable year of such corporation, and
            ``(B) who provides significant services to or on behalf of 
        such S corporation during such taxable year,
such shareholder's net earnings from self-employment shall include 80 
percent of such shareholder's pro rata share (as determined under 
section 1366(a) of such Code) of the taxable income or loss of such 
corporation for such taxable year from service-related businesses (as 
defined in section 1402(k)(3) of such Code) carried on by such 
corporation, and to the extent provided in regulations, for any other 
taxable year to the extent attributable to such services.
    ``(2) In determining the amount to be taken into account under 
paragraph (1), the exceptions provided in subsection (a) shall apply, 
except that, in the case of the exceptions provided in subsection 
(a)(5), rules similar to the rules of subparagraph (B) thereof shall 
apply to shareholders in S corporations.''
    (b) Treatment of Certain Limited Partners.--
            (1) Amendment of the internal revenue code.--Paragraph (13) 
        of section 1402(a) is amended to read as follows:
            ``(13) there shall be excluded the distributive share of 
        any item of income or loss of a limited partner, as such, other 
        than--
                    ``(A) guaranteed payments described in section 
                707(c) to that partner for services actually rendered 
                to or on behalf of the partnership to the extent that 
                those payments are established to be in the nature of 
                remuneration for those services, or
                    ``(B) in the case of a limited partner who provides 
                significant services to or on behalf of the partnership 
                for any taxable year of the partnership, 80 percent of 
                the limited partner's distributive share (determined 
                without regard to payments described in subparagraph 
                (A)) of the taxable income or loss of such 
                partnership--
                            ``(i) for such taxable year from service-
                        related businesses (as defined in subsection 
                        (k)(3)) of such partnership, and
                            ``(ii) to the extent provided in 
                        regulations, for any other taxable year to the 
                        extent attributable to such services;''.
            (2) Amendment of the social security act.--Paragraph (12) 
        of section 211(a) of the Social Security Act is amended to read 
        as follows:
            ``(12) there shall be excluded the distributive share of 
        any item of income or loss of a limited partner, as such, other 
        than--
                    ``(A) guaranteed payments described in section 
                707(c) of the Internal Revenue Code of 1986 to that 
                partner for services actually rendered to or on behalf 
                of the partnership to the extent that those payments 
                are established to be in the nature of remuneration for 
                those services, or
                    ``(B) in the case of a limited partner who provides 
                significant services to or on behalf of the partnership 
                for any taxable year of the partnership, 80 percent of 
                the limited partner's distributive share (determined 
                without regard to payments described in subparagraph 
                (A)) of the taxable income or loss of such 
                partnership--
                            ``(i) for such taxable year from service-
                        related businesses (as defined in section 
                        1402(k)(3) of such Code) of such partnership, 
                        and
                            ``(ii) to the extent provided in 
                        regulations prescribed by the Secretary of the 
                        Treasury, for any other taxable year to the 
                        extent attributable to such services;''.
    (c) Inventory Income.--Section 1402 (relating to definitions), as 
amended by subsection (a), is amended by adding at the end the 
following new subsection:
    ``(l) Inventory Income.--
            ``(1) In general.--The net earnings from self-employment of 
        any taxpayer for any taxable year under subsection (a) 
        (determined without regard to this subsection) shall be reduced 
        by 40 percent of the lesser of--
                    ``(A) the taxpayer's allocable share of net 
                inventory income, or
                    ``(B) the amount of such net earnings in excess of 
                the applicable amount for the taxable year.
            ``(2) Net inventory income.--
                    ``(A) In general.--For purposes of paragraph (1), 
                the term `net inventory income' means net income from 
                the sale of property described in section 1221(1).
                    ``(B) Dealers in securities.--For purposes of 
                subparagraph (A)--
                            ``(i) any security described in section 
                        475(c)(2) (without regard to the last sentence 
                        thereof) which is held by a person as a dealer 
                        in securities (as defined in section 475(c)(1)) 
                        shall be treated as property described in 
                        section 1221(1), and
                            ``(ii) net income from any such security 
                        shall be taken into account to the extent 
                        otherwise taken into account in computing net 
                        earnings from self-employment.
            ``(3) Applicable amount.--For purposes of paragraph (1), 
        the term `applicable amount' means the excess of--
                    ``(A) $135,000, adjusted, in the case of any 
                taxable year beginning in any calendar year after 1996, 
                in the same manner as is used in adjusting the 
                contribution and benefit base for the calendar year 
                under section 230(b) of the Social Security Act, over
                    ``(B) the amount of wages paid to the individual 
                during the taxable year.''
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years of individuals beginning after December 31, 
1995, and to taxable years of S corporations and partnerships ending 
with or within such taxable years of individuals.

SEC. 717. EXTENDING MEDICARE COVERAGE OF, AND APPLICATION OF HOSPITAL 
              INSURANCE TAX TO, ALL STATE AND LOCAL GOVERNMENT 
              EMPLOYEES.

    (a) In General.--
            (1) Application of hospital insurance tax.--Section 
        3121(u)(2) is amended by striking subparagraphs (C) and (D).
            (2) Coverage under medicare.--Section 210(p) of the Social 
        Security Act (42 U.S.C. 410(p)) is amended by striking 
        paragraphs (3) and (4).
            (3) Effective date.--The amendments made by this subsection 
        shall apply to services performed after September 30, 1995.
    (b) Transition in Benefits for State and Local Government Employees 
and Former Employees.--
            (1) In general.--
                    (A) Employees newly subject to tax.--For purposes 
                of sections 226, 226A, and 1811 of the Social Security 
                Act, in the case of any individual who performs 
                services during the calendar quarter beginning October 
                1, 1995, the wages for which are subject to the tax 
                imposed by section 3101(b) of the Internal Revenue Code 
                of 1986 only because of the amendment made by 
                subsection (a), the individual's medicare qualified 
                State or local government employment (as defined in 
                subparagraph (B)) performed before October 1, 1995, 
                shall be considered to be ``employment'' (as defined 
                for purposes of title II of such Act), but only for 
                purposes of providing the individual (or another 
                person) with entitlement to hospital insurance benefits 
                under part A of title XVIII of such Act for months 
                beginning with October 1995.
                    (B) Medicare qualified state or local government 
                employment defined.--In this paragraph, the term 
                ``medicare qualified State or local government 
                employment'' means medicare qualified government 
                employment described in section 210(p)(1)(B) of the 
                Social Security Act (determined without regard to 
                section 210(p)(3) of such Act, as in effect before its 
                repeal under subsection (a)(2)).
            (2) Authorization of appropriations.--There are authorized 
        to be appropriated to the Federal Hospital Insurance Trust Fund 
        from time to time such sums as the Secretary of Health and 
        Human Services deems necessary for any fiscal year on account 
        of--
                    (A) payments made or to be made during such fiscal 
                year from such Trust Fund with respect to individuals 
                who are entitled to benefits under title XVIII of the 
                Social Security Act solely by reason of paragraph (1),
                    (B) the additional administrative expenses 
                resulting or expected to result therefrom, and
                    (C) any loss in interest to such Trust Fund 
                resulting from the payment of those amounts, in order 
                to place such Trust Fund in the same position at the 
                end of such fiscal year as it would have been in if 
                this subsection had not been enacted.
            (3) Information to individuals who are prospective medicare 
        beneficiaries based on state and local government employment.--
        Section 226(g) of the Social Security Act (42 U.S.C. 426(g)) is 
        amended--
                    (A) by redesignating paragraphs (1) through (3) as 
                subparagraphs (A) through (C), respectively,
                    (B) by inserting ``(1)'' after ``(g)'', and
                    (C) by adding at the end the following new 
                paragraph:
            ``(2) The Secretary, in consultation with State and local 
        governments, shall provide procedures designed to assure that 
        individuals who perform medicare qualified government 
        employment by virtue of service described in section 210(a)(7) 
        are fully informed with respect to (A) their eligibility or 
        potential eligibility for hospital insurance benefits (based on 
        such employment) under part A of title XVIII, (B) the 
        requirements for, and conditions of, such eligibility, and (C) 
        the necessity of timely application as a condition of becoming 
        entitled under subsection (b)(2)(C), giving particular 
        attention to individuals who apply for an annuity or retirement 
        benefit and whose eligibility for such annuity or retirement 
        benefit is based on a disability.''
    (c) Technical Amendments.--
            (1) Subparagraph (A) of section 3121(u)(2) is amended by 
        striking ``subparagraphs (B) and (C),'' and inserting 
        ``subparagraph (B),''.
            (2) Subparagraph (B) of section 210(p)(1) of the Social 
        Security Act (42 U.S.C. 410(p)(1)) is amended by striking 
        ``paragraphs (2) and (3).'' and inserting ``paragraph (2).''
            (3) Section 218 of the Social Security Act (42 U.S.C. 418) 
        is amended by striking subsection (n).
            (4) The amendments made by this subsection shall apply 
        after September 30, 1995.

       Subtitle B--Tax Treatment of Employer-Provided Health Care

SEC. 721. TAX TREATMENT OF VOLUNTARY EMPLOYER HEALTH CARE 
              CONTRIBUTIONS.

    (a) In General.--Chapter 37 (relating to health-related taxes), as 
added by section 705, is amended by adding at the end the following new 
subchapter:

      ``Subchapter B--Voluntary Employer-Provided Health Benefits

                              ``Sec. 4521. Taxable employer-provided 
                                        health benefits.
                              ``Sec. 4522. Discriminatory employer 
                                        practices.
                              ``Sec. 4523. Exceptions.
                              ``Sec. 4524. Definitions and special 
                                        rules.

``SEC. 4521. TAXABLE EMPLOYER-PROVIDED HEALTH BENEFITS.

    ``(a) Imposition of Tax.--There is hereby imposed a tax equal to 
the product of--
            ``(1) the sum of--
                    ``(A) the taxable employer contributions for any 
                taxable year, plus
                    ``(B) the aggregate employer contributions for 
                permitted coverage described in subparagraph (A) or (B) 
                of subsection (b)(2) during any portion of the taxable 
                year during which there is discriminatory permitted 
                coverage, and
            ``(2) the highest rate of tax imposed under section 11(b) 
        for the taxable year.
    ``(b)  Taxable Employer Contribution.--For purposes of this 
section--
            ``(1) In general.--The term `taxable employer contribution' 
        means any employer contribution under an accident or health 
        plan for coverage of an employee other than permitted coverage.
            ``(2) Permitted coverage.--For purposes of this subsection, 
        the term `permitted coverage' means--
                    ``(A) coverage under a certified standard health 
                plan (as defined in section 21011(a)(2) of the Social 
                Security Act),
                    ``(B) coverage under a certified supplemental 
                health benefit plan (as defined in section 21011(a)(4) 
                of the Social Security Act), except that this 
                subparagraph shall not apply to coverage of any 
                employee who is covered under such a certified standard 
                health plan which provides the alternative standard 
                benefits package described in subtitle C of such Act,
                    ``(C) coverage under a qualified long-term care 
                insurance policy (as defined in section 7702B(b)),
                    ``(D) coverage providing wages or payments in lieu 
                of wages for any period during which the employee is 
                absent from work on account of sickness or injury,
                    ``(E) coverage only for accidental death or 
                dismemberment,
                    ``(F) coverage under a medicare supplemental policy 
                (as defined in section 1882(g)(1) of the Social 
                Security Act),
                    ``(G) worker's compensation or similar insurance, 
                and
                    ``(H) coverage under an equivalent health care 
                program (as defined in section 21100(6) of the Social 
                Security Act).
    ``(c) Discriminatory Permitted Coverage.--For purposes of this 
section, the term `discriminatory permitted coverage' means, with 
respect to any period, coverage--
            ``(1) which is permitted coverage described in subparagraph 
        (A) or (B) of subsection (b)(2), and
            ``(2) with respect to which the requirements of subsection 
        (a) or (b) of section 4522 are not met during such period.

``SEC. 4522. DISCRIMINATORY EMPLOYER PRACTICES.

    ``(a) Health Status Requirements.--For purposes of section 4521(c), 
an employer meets the requirements of this subsection if, with respect 
to coverage described in such section--
            ``(1) there is no waiting period or denial of coverage with 
        respect to an employee, and
            ``(2) the amount of the employer contribution on behalf of 
        an employee is not conditioned, and does not vary,
by reason of the employee's health status, claims experience, medical 
history, receipt of health care, or lack of evidence of insurability.
    ``(b) Uniform Contribution Requirements.--
            ``(1) In general.--For purposes of section 4521(c), an 
        employer meets the requirements of this subsection if the 
        employer contribution on behalf of an employee for coverage 
        described in such section is equivalent to each employer 
        contribution on behalf of all other employees who elect such 
        coverage under plans offered by the employer.
            ``(2) Equivalent contribution.--For purposes of paragraph 
        (1), a contribution is equivalent to any other contribution 
        if--
                    ``(A) it is the same dollar amount as the other 
                contribution,
                    ``(B) it represents the same percentage of cost 
                under the plan to which it is made as does the other 
                contribution, or
                    ``(C) it represents the same percentage of the 
                weighted average premium for the class of enrollment 
                (as defined in section 1952 of the Social Security Act) 
                for the community rating area in which the employee 
                works as does the other contribution.
        For purposes of applying subparagraph (B) or (C), any dollar 
        limitation applicable to all employer contributions (whether 
        expressed as a dollar amount or a percentage described in 
        subparagraph (C)) shall be disregarded.
            ``(3) Excluded employees.--
                    ``(A) In general.--The following employees of an 
                employer shall be excluded from consideration under 
                this subsection:
                            ``(i) Any employee before the employee has 
                        completed 6 months of service with the 
                        employer.
                            ``(ii) Any employee who normally works less 
                        than 24 hours per week.
                            ``(iii) Any employee who normally works 
                        during not more than 6 months of any year.
                            ``(iv) Any employee who has not attained 
                        age 18.
                            ``(v) Any employee who is included in a 
                        unit of employees covered by an agreement which 
                        the Secretary finds to be a collective 
                        bargaining agreement between employee 
                        representatives and 1 or more employers if 
                        there is evidence that employer-provided 
                        benefits for standard health benefits coverage 
                        was the subject of good faith bargaining 
                        between the employee representatives and 
                        employer or employers.
                            ``(vi) Any employee who is a nonresident 
                        alien and who receives no earned income (within 
                        the meaning of section 911(d)(2)) from the 
                        employer which constitutes income from sources 
                        within the United States (within the meaning of 
                        section 861(a)(3)).
                            ``(vii) Any former employee.
                    ``(B) Coverage of part-time employees.--
                            ``(i) In general.--If an employer makes an 
                        employer contribution for any period for 
                        coverage described in section 4521(c) for any 
                        employee who normally works at least 10 hours 
                        but less than 24 hours per week, subparagraph 
                        (A)(ii) shall be applied by substituting `10 
                        hours' for `24 hours'.
                            ``(ii) Requirements may be met 
                        separately.--If an employer elects the 
                        application of this clause--
                                    ``(I) the requirements of this 
                                subsection shall be applied separately 
                                to employees to whom this subsection 
                                applies by reason of clause (i), and
                                    ``(II) such employees shall be 
                                excluded in determining whether such 
                                requirements are met with respect to 
                                any other employees.
                            ``(iii) Pro rata contributions 
                        permissible.--For purposes of this subsection, 
                        contributions on behalf of any employee to 
                        which this subsection applies by reason of 
                        clause (i) shall not fail to be treated as 
                        equivalent solely because they are 
                        proportionate to the number of hours the 
                        employee works.
            ``(4) Aggregation rules.--For purposes of this subsection--
                    ``(A) In general.--All employers treated as a 
                single employer under subsection (b) or (c) of section 
                414 shall be treated as a single employer.
                    ``(B) Affiliated service groups.--All employees of 
                members of an affiliated service group (as defined in 
                section 414(m)) shall be treated as employed by a 
                single employer.
            ``(5) Separate lines of business.--If, under section 
        414(r), an employer is treated as operating separate lines of 
        business for a year, the employer may apply this subsection 
        separately to employees in each separate line of business.

``SEC. 4523. EXCEPTIONS.

    ``(a) Exception for Reasonable Diligence.--No tax shall be imposed 
by this subchapter during any period for which it is established to the 
satisfaction of the Secretary that the employer did not know, or 
exercising reasonable diligence would not have known, that the employer 
had taken any action subject to tax under this subchapter.
    ``(b) Corrections Within 30 Days.--No tax shall be imposed by this 
subchapter with respect to any action subject to tax under this 
subchapter if--
            ``(1) such action was due to reasonable cause and not to 
        willful neglect, and
            ``(2) such action is corrected during the 30-day period 
        beginning on the 1st date the employer knew, or exercising 
        reasonable diligence would have known, that such action was 
        subject to such tax.
    ``(c) Waiver by Secretary.--In the case of any action subject to 
tax under this subchapter which is due to reasonable cause and not to 
willful neglect, the Secretary may waive part or all of any tax imposed 
by this subchapter to the extent that the payment of such tax would be 
excessive relative to the failure involved.

``SEC. 4524. DEFINITIONS AND SPECIAL RULES.

    ``(a) Definitions.--For purposes of this subchapter--
            ``(1) Employer.--
                    ``(A) In general.--The term `employer' means any 
                person or governmental entity for whom an individual 
                performs services, of whatever nature, as an employee 
                (as defined in section 3401(c)).
                    ``(B) Special rules.--
                            ``(i) A partnership shall be treated as the 
                        employer of each partner who is an employee 
                        within the meaning of section 401(c)(1).
                            ``(ii) An S corporation shall be treated as 
                        the employer of each shareholder who is an 
                        employee within the meaning of section 
                        401(c)(1).
            ``(2) Employer contributions.--
                    ``(A) In general.--The term `employer contribution' 
                means, with respect to coverage under a health plan, a 
                reasonable estimate of the portion of the cost of the 
                coverage which is to be provided by the employer.
                    ``(B) Special rule for cafeteria plans.--The cost 
                of any coverage provided through a cafeteria plan shall 
                be determined on the basis of the coverage available 
                through the plan.
    ``(b) Liability for Tax.--Any tax imposed by this subchapter shall 
be paid by the employer.
    ``(c) Taxes To Apply to Governmental and Other Tax-Exempt 
Entities.--Notwithstanding any other provision of law or rule of law, 
none of the following shall be exempt from the taxes imposed by this 
subchapter:
            ``(1) The United States, any State or political subdivision 
        thereof, the District of Columbia, and any agency or 
        instrumentality of any of the foregoing.
            ``(2) Any other entity otherwise exempt from tax under 
        chapter 1.
    ``(d) No Cover Over to Possessions.--Notwithstanding any other 
provision of law, no amount collected under this subchapter shall be 
covered over to any possession of the United States.
    ``(e) Regulations.--The Secretary shall prescribe such regulations 
as are necessary to carry out the provisions of this subchapter, 
including regulations providing for the determination of the amount of 
any employer contribution, the aggregation of governmental and tax-
exempt entities, and the prevention of the avoidance of any tax imposed 
by this subchapter through the use of any arrangement described in 
section 414(o).''
    (b) Employee Leasing.--Paragraph (3) of section 414(n) is amended 
by striking ``and'' at the end of subparagraph (B), by striking the 
period at the end of subparagraph (C) and inserting ``, and'', and by 
adding at the end the following new subparagraph:
                    ``(D) subchapter B of chapter 37.''
    (c) Tax Not Deductible.--Paragraph (7) of section 275(a), as added 
by section 706(b), is amended by inserting ``or 4521 (relating to 
taxable employer-provided health benefits'' after ``plans)''.
    (d) Conforming Amendment.--The table of subchapters for chapter 37 
is amended by adding at the end the following new item:

                              ``Subchapter B. Voluntary employer-
                                        provided health benefits.''
    (e) Effective Date.--The amendments made by this section shall take 
effect on January 1, 1996.

SEC. 722. ELIMINATION OF EXCLUSION OF HEALTH BENEFITS PROVIDED THROUGH 
              A FLEXIBLE SPENDING ARRANGEMENT.

    (a) In General.--The text of section 106 (relating to contributions 
by employer to accident and health plans) is amended to read as 
follows:
    ``(a) General Rule.--Except as otherwise provided in this section, 
gross income of an employee does not include employer-provided coverage 
under an accident or health plan.
    ``(b) Exception for Coverage Through Flexible Spending 
Arrangements.--
            ``(1) In general.--Subsection (a) shall not apply to 
        coverage provided through a flexible spending or similar 
        arrangement.
            ``(2) Flexible spending arrangement.--For purposes of this 
        subsection, a flexible spending arrangement is a benefit 
        program which provides employees with coverage under which--
                    ``(A) specified incurred expenses may be reimbursed 
                (subject to reimbursement maximums and other reasonable 
                conditions), and
                    ``(B) the maximum amount of reimbursement which is 
                reasonably available to a participant for such coverage 
                is less than 500 percent of the cost of such coverage.
        In the case of an insured plan, the maximum amount reasonably 
        available shall be determined on the basis of the underlying 
        coverage.''
    (b) Employment Tax Treatment.--
            (1) Social security tax.--
                    (A) Subsection (a) of section 3121 is amended by 
                inserting after paragraph (21) the following new 
                sentence:
``Nothing in paragraph (2) shall exclude from the term `wages' any 
amount which is required to be included in gross income under section 
106(b).''
                    (B) Subsection (a) of section 209 of the Social 
                Security Act is amended by inserting after paragraph 
                (21) the following new sentence:
``Nothing in paragraph (2) shall exclude from the term `wages' any 
amount which is required to be included in gross income under section 
106(b) of the Internal Revenue Code of 1986.''
            (2) Railroad retirement tax.--Paragraph (1) of section 
        3231(e) is amended by adding at the end thereof the following 
        new sentence: ``Nothing in clause (i) of the second sentence of 
        this paragraph shall exclude from the term `compensation' any 
        amount which is required to be included in gross income under 
        section 106(b).''
            (3) Unemployment tax.--Subsection (b) of section 3306 is 
        amended by inserting after paragraph (16) the following new 
        sentence:
``Nothing in paragraph (2) shall exclude from the term `wages' any 
amount which is required to be included in gross income under section 
106(b).''
            (4) Wage withholding.--Subsection (a) of section 3401 is 
        amended by adding at the end thereof the following new 
        sentence:
``Nothing in the preceding provisions of this subsection shall exclude 
from the term `wages' any amount which is required to be included in 
gross income under section 106(b).''
    (c) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        take effect on January 1, 1996.
            (2) Benefits provided pursuant to collective bargaining 
        agreements.--In the case of a flexible spending arrangement 
        maintained pursuant to 1 or more collective bargaining 
        agreements between employee representatives and 1 or more 
        employers which was ratified before June 30, 1994, the 
        amendments referred to in paragraph (1) shall not apply to 
        benefits pursuant to any such agreement before the later of--
                    (A) January 1, 1996, or
                    (B) the earlier of--
                            (i) the date on which the last of such 
                        agreements terminate (determined without regard 
                        to any extension thereof on or after June 30, 
                        1994), or
                            (ii) January 1, 1998.

SEC. 723. 2-YEAR EXTENSION OF DEDUCTION FOR HEALTH INSURANCE COSTS OF 
              SELF-EMPLOYED INDIVIDUALS.

    (a) In General.--Paragraph (6) of section 162(l) (relating to 
special rules for health insurance costs of self-employed individuals) 
is amended by striking ``1993'' and inserting ``1995''.
    (b) Effective Date.--The amendment made by paragraph (1) shall 
apply to taxable years beginning after December 31, 1993.

SEC. 724. LIMITATION ON PREPAYMENT OF MEDICAL INSURANCE PREMIUMS.

    (a) General Rule.--Subsection (d) of section 213 is amended by 
adding at the end the following new paragraph:
            ``(10) Limitation on prepayments.--If the taxpayer pays a 
        premium or other amount which constitutes medical care under 
        paragraph (1), to the extent such premium or other amount is 
        properly allocable to insurance coverage or care to be provided 
        during periods more than 12 months after the month in which 
        such payment is made, such premium shall be treated as paid 
        ratably over the period during which such insurance coverage or 
        care is to be provided. The preceding sentence shall not apply 
        to any premium to which paragraph (7) applies.''
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to amounts paid after December 31, 1994.

 Subtitle C--Deduction for Individuals Purchasing Own Health Insurance

SEC. 731. DEDUCTION FOR HEALTH INSURANCE COSTS OF INDIVIDUALS.

    (a) In General.--Section 213 (relating to deduction for medical, 
dental, etc. expenses) is amended by adding at the end the following 
new subsection:
    ``(f) Standard Health Insurance Costs of Individuals.--
            ``(1) In general.--The adjusted gross income limitation 
        under subsection (a) shall not apply to 100 percent of the 
        amounts paid by an eligible individual during the taxable year 
        for qualified health care costs (and such amounts shall not be 
        taken into account in determining whether such limitation 
        applies to other amounts).
            ``(2) Qualified health care costs.--For purposes of this 
        subsection--
                    ``(A) In general.--The term `qualified health care 
                costs' means expenses for coverage of the taxpayer, the 
                taxpayer's spouse, or any dependent under a certified 
                standard health plan.
                    ``(B) Limitations.--For purposes of subparagraph 
                (A)--
                            ``(i) No deduction for employer-subsidized 
                        health costs.--Qualified health care costs 
                        shall not include any amount paid for coverage 
                        of an individual under a certified standard 
                        health plan for any month if the individual is 
                        eligible to participate for such month in an 
                        employer-subsidized certified standard health 
                        plan maintained by any employer of the 
                        taxpayer, the taxpayer's spouse, or any 
                        dependent.
                            ``(ii) Certain prepayments.--If any amount 
                        paid during a taxable year is allocable to 
                        coverage to be provided more than 12 months 
                        after the month of payment, such amount shall 
                        be treated as paid ratably over the period of 
                        the coverage.
            ``(3) Other definitions and special rules.--For purposes of 
        this subsection--
                    ``(A) Certified standard health plan.--The term 
                `certified standard health plan' has the meaning given 
                such term by section 21011(a)(2) of the Social Security 
                Act.
                    ``(B) Employer.--The term `employer' has the 
                meaning given such term by section 4524(a)(1).
                    ``(C) Deduction not allowed for self-employment tax 
                purposes.--The deduction allowable by reason of this 
                subsection shall not be taken into account in 
                determining an individual's net earnings from self-
                employment (within the meaning of section 1402(a)) for 
                purposes of chapter 2.
            ``(4) Reduction in percentage.--For requirement that the 
        President reduce the percentage under paragraph (1) to offset 
        deficits in Federal health care spending, see section 801 of 
        the Health Security Act.''
    (b) Deduction Allowed Against Gross Income.--Section 62(a) 
(defining adjusted gross income) is amended by inserting after 
paragraph (15) the following new paragraph:
            ``(16) Deduction for qualified health care costs.--The 
        deduction allowed under section 213(a) for amounts described in 
        section 213(f).''
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1995.

                    Subtitle D--Exempt Organizations

                   PART I--HEALTH CARE ORGANIZATIONS

SEC. 741. QUALIFICATION AND DISCLOSURE REQUIREMENTS FOR NONPROFIT 
              HEALTH CARE ORGANIZATIONS.

    (a) Treatment of Hospitals and Other Entities Providing Health Care 
Services.--Section 501 (relating to exemption from tax on corporations, 
certain trusts, etc.) is amended by redesignating subsection (n) as 
subsection (o) and by inserting after subsection (m) the following new 
subsection:
    ``(n) Qualification of Health Care Organizations as Exempt 
Organizations.--
            ``(1) In general.--An organization which is described in 
        paragraph (3) or (4) of subsection (c) and the predominant 
        activity of which is the provision of health care services 
        shall be exempt from tax under subsection (a) only if--
                    ``(A) such organization, with the participation of 
                community representatives, annually--
                            ``(i) assesses its community's needs for 
                        health care services and qualified outreach 
                        services, and
                            ``(ii) prepares a written plan to meet 
                        those needs,
                    ``(B) pursuant to such plan, such organization 
                provides (directly or indirectly) significant qualified 
                outreach services,
                    ``(C) such organization does not discriminate 
                against individuals in the provision of health care 
                services on the basis of participation in a government-
                sponsored health plan, and
                    ``(D) such organization does not discriminate 
                against individuals in the provision of emergency 
                health care services on the basis of ability to pay.
            ``(2) Special rule for health maintenance organizations.--A 
        health maintenance organization shall not be treated as 
        described in subsection (c)(3) unless substantially all of its 
        primary care health services are provided as described in 
        subsection (m)(6)(A).
            ``(3) Definitions and special rule.--For purposes of this 
        subsection--
                    ``(A) Qualified outreach services.--The term 
                `qualified outreach services' means health care 
                services (or preventive care, educational, or social 
                services programs related thereto) which are provided--
                            ``(i) in 1 or more medically underserved 
                        areas,
                            ``(ii) at below cost to individuals who are 
                        otherwise unable to afford such services, or
                            ``(iii) at emergency care facilities which 
                        provide specialty services and which normally 
                        operate at a loss.
                Such term shall not include insurance described in 
                subparagraph (B)(iii) unless such insurance is provided 
                on a subsidized basis.
                    ``(B) Health care services.--The term `health care 
                services' means--
                            ``(i) any activity which consists of 
                        providing medical care (as defined in section 
                        213(d)(1)(A)) to individuals,
                            ``(ii) in the case of an organization 
                        described in subsection (c)(3), any activity 
                        which is treated as accomplishing an exempt 
                        purpose of the organization solely because it 
                        is carried on as part of an activity described 
                        in clause (i), and
                            ``(iii) insurance (other than commercial-
                        type insurance, as defined in subsection (m)) 
                        for the activities described in clauses (i) and 
                        (ii).
                    ``(C) Medically underserved area.--The term 
                `medically underserved area' means, with respect to a 
                health care service, any area reasonably determined by 
                the organization (in a manner not inconsistent with 
                regulations prescribed by the Secretary) to have--
                            ``(i) a shortage (relative to the number of 
                        individuals needing such service) of health 
                        professionals performing such service, or
                            ``(ii) a population group experiencing such 
                        a shortage.
                Such term includes a health professional shortage area 
                (as defined in section 332 of the Public Health Service 
                Act).
            ``(4) Exceptions.--This subsection shall not apply to any 
        organization which--
                    ``(A) demonstrates, in a manner not inconsistent 
                with regulations prescribed by the Secretary, that one 
                of its principal purposes is academic training or 
                medical research, or
                    ``(B) provides health care services exclusively on 
                an uncompensated basis, regardless of ability to pay.
            ``(5) Disallowance of charitable deductions.--No gift or 
        bequest to an organization which is not exempt from tax by 
        reason of this subsection shall be allowed as a deduction under 
        section 170, 545(b)(2), 556(b)(2), 642(c), 2055, 2106(a)(2), or 
        2522.
            ``(6) Requirements supplement other requirements.--The 
        requirements of this subsection are in addition to, and not in 
        lieu of, the requirements otherwise applicable to an 
        organization described in paragraph (3) or (4) of subsection 
        (c).''
    (b) Reporting and Disclosure of Needs Assessment and Plan.--
            (1) Reporting.--
                    (A) Organizations described in section 501(c)(3).--
                Subsection (b) of section 6033 (relating to certain 
                organizations described in section 501(c)(3)) is 
                amended by striking ``and'' at the end of paragraph 
                (9), by redesignating paragraph (10) as paragraph (12), 
                and by inserting after paragraph (9) the following new 
                paragraphs:
            ``(10) in the case of an organization which prepares a plan 
        described in section 501(n)(1)(A) (relating to community 
        needs)--
                    ``(A) a copy of such plan for the year, and
                    ``(B) information on the implementation of such 
                plan for the year (including unrecovered costs and 
                revenues foregone in furtherance of such plan),
            ``(11) such information as the Secretary may require with 
        respect to any taxable inurement (as defined in section 
        4958(d)), and''.
                    (B) Organizations described in section 501(c)(4).--
                Section 6033 is amended by redesignating subsection (f) 
                as subsection (g) and by inserting after subsection (e) 
                the following new subsection:
    ``(f) Certain Organizations Described in Section 501(c)(4).--Every 
organization described in section 501(c)(4) which is subject to the 
requirements of subsection (a) and which prepares a plan described in 
section 501(n)(1)(A) (relating to community needs) for the year--
            ``(1) shall include a copy of such plan with the return 
        required under subsection (a) for the year, and
            ``(2) shall include on such return the information referred 
        to in paragraphs (10)(B) and (11) of subsection (b) with 
        respect to such organization.''
            (2) Disclosure.--
                    (A) In general.--Subsection (e) of section 6104 
                (relating to public inspection of certain annual 
                returns and applications for exemption) is amended by 
                adding at the end the following new paragraph:
            ``(3) Community health care needs assessment and plan.--
                    ``(A) In general.--Every organization which is 
                required to prepare a plan described in section 
                501(n)(1)(A) (relating to community needs)--
                            ``(i) shall make a copy of such plan (and 
                        the assessment on which such plan is based) 
                        available for inspection during regular 
                        business hours by any individual at the 
                        principal office of such organization and, if 
                        such organization regularly maintains 1 or more 
                        regional or district offices having 3 or more 
                        employees, at each such regional or district 
                        office, and
                            ``(ii) upon request of an individual made 
                        at such principal office or such a regional or 
                        district office, shall provide--
                                    ``(I) a copy of such plan (and 
                                assessment), and
                                    ``(II) a copy of the annual return 
                                filed under section 6033,
                        to such individual without charge other than a 
                        reasonable fee for any reproduction and mailing 
                        costs.
                If the request under clause (ii) is made in person, 
                such copies shall be provided immediately and, if made 
                other than in person, shall be provided within 30 days.
                    ``(B) Period of availability.--Subparagraph (A) 
                shall apply--
                            ``(i) with respect to any plan (and 
                        assessment) during the 3-year period after the 
                        close of the year for which such plan is 
                        prepared, and
                            ``(ii) with respect to any return, during 
                        the 3-year period beginning on the filing date 
                        (as defined in paragraph (1)(D)).
                    ``(C) Limitation.--Subparagraph (A)(ii) shall not 
                apply to any request if the Secretary determines, upon 
                application by an organization, that such request is 
                part of a harassment campaign and that compliance with 
                such request is not in the public interest.''
                    (B) Technical amendment.--The heading for 
                subsection (e) of section 6104 is amended by striking 
                ``and Applications for Exemption'' and inserting ``, 
                Applications for Exemption, and Community Needs 
                Assessment and Plan for Health and Outreach Services''.
    (c) Effective Dates.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall take effect on January 1, 
        1995.
            (2) HMO service requirement.--So much of the amendments 
        made by this section as relates to section 501(n)(2) of the 
        Internal Revenue Code of 1986, as added by this section, shall 
        take effect on the date of the enactment of this Act.

SEC. 742. EXCISE TAXES FOR PRIVATE INUREMENT BY TAX-EXEMPT HEALTH CARE 
              ORGANIZATIONS.

    (a) In General.--Chapter 42 (relating to private foundations and 
certain other tax-exempt organizations) is amended by redesignating 
subchapter D as subchapter E and by inserting after subchapter C the 
following new subchapter:

      ``Subchapter D--Private Inurement by Tax-Exempt Health Care 
                             Organizations

                              ``Sec. 4958. Taxes on private inurement.
                              ``Sec. 4959. Other definitions.

``SEC. 4958. TAXES ON PRIVATE INUREMENT.

    ``(a) Initial Taxes.--
            ``(1) On the beneficiary.--There is hereby imposed on any 
        taxable inurement a tax equal to 25 percent of the amount 
        thereof. The tax imposed by this paragraph shall be paid by any 
        beneficiary of such inurement.
            ``(2) On the management.--In any case in which there is a 
        tax imposed by paragraph (1), there is hereby imposed on the 
        participation of any organization manager of an organization in 
        any taxable inurement which occurs with respect to such 
        organization, knowing that it is taxable inurement, a tax equal 
        to 2\1/2\ percent of the amount thereof, unless such 
        participation is not willful and is due to reasonable cause. 
        The tax imposed by this paragraph shall be paid by any 
        organization manager who participated in the taxable inurement.
    ``(b) Additional Taxes.--
            ``(1) On the beneficiary.--In any case in which an initial 
        tax is imposed by subsection (a)(1) on any taxable inurement 
        and such inurement is not corrected within the taxable period, 
        there is hereby imposed a tax equal to 200 percent of the 
        amount of the taxable inurement. The tax imposed by this 
        paragraph shall be paid by any beneficiary of such inurement.
            ``(2) On the management.--In any case in which an 
        additional tax is imposed by paragraph (1), if an organization 
        manager refused to agree to part or all of the correction, 
        there is hereby imposed a tax equal to 50 percent of the amount 
        of the taxable inurement. The tax imposed by this paragraph 
        shall be paid by any organization manager who refused to agree 
        to part or all of the correction.
    ``(c) Special Rules Relating to Liability for Tax.--For purposes of 
this section--
            ``(1) Joint and several liability.--If more than one person 
        is liable under any paragraph of subsection (a) or (b) with 
        respect to any one taxable inurement, all such persons shall be 
        jointly and severally liable under such paragraph with respect 
        to such inurement.
            ``(2) Limit for management.--With respect to any 1 taxable 
        inurement, the maximum amount of the tax imposed by subsection 
        (a)(2) shall not exceed $10,000, and the maximum amount of the 
        tax imposed by subsection (b)(2) shall not exceed $10,000.
    ``(d) Taxable Inurement.--For purposes of this section, the term 
`taxable inurement' means any inurement not permitted under paragraph 
(3) or (4) of section 501(c), as the case may be, in a transaction 
involving an applicable tax-exempt health care organization in which--
            ``(1) the value of any economic benefit provided to or for 
        the use of a disqualified person exceeds the value of the 
        consideration (including the performance of services) received 
        by the organization for providing such benefit, or
            ``(2) the amount of any economic benefit provided to or for 
        the use of a disqualified person is determined in whole or in 
        part by the gross or net revenues of 1 or more activities of 
        the organization.
The amount of any taxable inurement with respect to any such 
transaction shall be the excess described in paragraph (1) or the 
amount described in paragraph (2). For purposes of paragraph (1), an 
economic benefit shall not be treated as provided as consideration for 
the performance of services unless the organization clearly indicated 
its intent to so treat such benefit.
    ``(e) Other Definitions.--For purposes of this section--
            ``(1) Disqualified person.--The term `disqualified person' 
        means, with respect to any transaction--
                    ``(A) any person who was, at any time during the 5-
                year period ending on the date of such transaction--
                            ``(i) an organization manager, or
                            ``(ii) an individual (other than an 
                        organization manager)--
                                    ``(I) in a position to exercise 
                                substantial influence over the affairs 
                                of the organization, or
                                    ``(II) performing substantial 
                                medical services as a physician 
                                pursuant to an employment or other 
                                contractual relationship with the 
                                organization or a related organization,
                    ``(B) a member of the family of an individual 
                described in subparagraph (A), and
                    ``(C) a 35-percent controlled entity.
            ``(2) Organization manager.--The term `organization 
        manager' means, with respect to any applicable tax-exempt 
        health care organization, any officer, director, or trustee of 
        such organization (or any individual having powers or 
        responsibilities similar to those of officers, directors, or 
        trustees of the organization).
            ``(3) 35-percent controlled entity.--
                    ``(A) In general.--The term `35-percent controlled 
                entity' means--
                            ``(i) a corporation in which persons 
                        described in subparagraph (A) or (B) of 
                        paragraph (1) own more than 35 percent of the 
                        total combined voting power,
                            ``(ii) a partnership in which such persons 
                        own more than 35 percent of the profits 
                        interest, and
                            ``(iii) a trust or estate in which such 
                        persons own more than 35 percent of the 
                        beneficial interest.
                    ``(B) Constructive ownership rules.--Rules similar 
                to the rules of paragraphs (3) and (4) of section 
                4946(a) shall apply for purposes of this subsection.
            ``(4) Family members.--The members of an individual's 
        family shall be determined under section 4946(d); except that 
        such members also shall include the brothers and sisters 
        (whether by the whole or halfblood) of the individual and their 
        spouses.
    ``(f) Treatment of Previously Exempt Organizations.--
            ``(1) In general.--For purposes of this section, the status 
        of any organization as an applicable tax-exempt health care 
        organization shall be terminated only if--
                    ``(A)(i) such organization notifies the Secretary 
                (at such time and in such manner as the Secretary may 
                by regulations prescribe) of its intent to accomplish 
                such termination, or
                    ``(ii) there is a final determination by the 
                Secretary that such status has terminated, and
                    ``(B)(i) such organization pays the tax imposed by 
                paragraph (2) (or any portion not abated pursuant to 
                paragraph (3)), or
                    ``(ii) the entire amount of such tax is abated 
                pursuant to paragraph (3).
            ``(2) Imposition of tax.--There is hereby imposed on each 
        organization referred to in paragraph (1) a tax equal to the 
        lesser of--
                    ``(A) the amount which the organization 
                substantiates by adequate records or other 
                corroborating evidence as the aggregate tax benefit 
                resulting from its exemption from tax under section 
                501(a), or
                    ``(B) the value of the net assets of such 
                organization.
            ``(3) Abatement of tax.--The Secretary may abate the unpaid 
        portion of the assessment of any tax imposed by paragraph (2), 
        or any liability in respect thereof, if the applicable tax-
        exempt health care organization distributes all of its net 
        assets to 1 or more organizations each of which has been in 
        existence, and described in section 501(c)(3), for a continuous 
        period of at least 60 calendar months. If the distributing 
        organization is described in section 501(c)(4), the preceding 
        sentence shall be applied by treating the reference to section 
        501(c)(3) as including a reference to section 501(c)(4).
            ``(4) Certain rules made applicable.--Rules similar to the 
        rules of subsections (d), (e), and (f) of section 507 shall 
        apply for purposes of this subsection.

``SEC. 4959. OTHER DEFINITIONS.

    ``(a) Applicable Tax-Exempt Health Care Organization.--For purposes 
of this subchapter, the term `applicable tax-exempt health care 
organization' means any organization--
            ``(1) the predominant activity of which is the provision of 
        health care services (as defined in section 501(n)(3)), and
            ``(2) which (without regard to any taxable inurement) would 
        be described in paragraph (3) or (4) of section 501(c) and 
        exempt from tax under section 501(a).
Such term does not include a private foundation (as defined in section 
509(a)).
    ``(b) Taxable Period; Correction.--For purposes of this 
subchapter--
            ``(1) Taxable period.--The term `taxable period' means, 
        with respect to any taxable inurement, the period beginning 
        with the date on which the inurement occurs and ending on the 
        earliest of--
                    ``(A) the date of mailing a notice of deficiency 
                under section 6212 with respect to the tax imposed by 
                subsection (a)(1) of section 4958, or
                    ``(B) the date on which the tax imposed by such 
                subsection (a)(1) is assessed.
            ``(2) Correction.--The terms `correction' and `correct' 
        mean, with respect to any taxable inurement, undoing the 
        inurement to the extent possible, establishing safeguards to 
        prevent future such inurement, and where fully undoing the 
        inurement is not possible, such additional corrective action as 
        is prescribed by the Secretary by regulations.''
    (b) Application of Private Inurement Rule to Tax-Exempt Health Care 
Organizations Described in Section 501(c)(4).--Paragraph (4) of section 
501(c) is amended by inserting ``(A)'' after ``(4)'' and by adding at 
the end the following:
            ``(B) Subparagraph (A) shall not apply to an entity the 
        predominant activity of which is the provision of health care 
        services (as defined in subsection (n)(3)) unless no part of 
        the net earnings of such entity inures to the benefit of any 
        private shareholder or individual.''
    (c) Technical and Conforming Amendments.--
            (1) Subsection (e) of section 4955 is amended--
                    (A) by striking ``Section 4945'' in the heading and 
                inserting ``Sections 4945 and 4958'', and
                    (B) by inserting before the period ``or a taxable 
                inurement for purposes of section 4958''.
            (2) Subsections (a), (b), and (c) of section 4963 are each 
        amended by inserting ``4958,'' after ``4955,''.
            (3) Subsection (e) of section 6213 is amended by inserting 
        ``4958 (relating to private inurement),'' before ``4971''.
            (4) Paragraphs (2) and (3) of section 7422(g) are each 
        amended by inserting ``4958,'' after ``4955,''.
            (5) Subsection (b) of section 7454 is amended by inserting 
        ``or whether an organization manager (as defined in section 
        4958(f)) has `knowingly' participated in taxable inurement (as 
        defined in section 4958(d)),'' after ``section 4912(b),''.
            (6) The table of subchapters for chapter 42 is amended by 
        striking the last item and inserting the following:

                              ``Subchapter D. Private inurement by tax-
                                        exempt health care 
                                        organizations.
                              ``Subchapter E. Abatement of first and 
                                        second tier taxes in certain 
                                        cases.''
    (d) Effective Dates.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to inurement 
        occurring on or after June 30, 1994.
            (2) Application of binding contract rule to tax-exempt 
        health care organizations described in section 501(c)(4).--The 
        amendments made by this section shall not apply to any 
        inurement involving an organization described in section 
        501(c)(4) of the Internal Revenue Code of 1986 occurring before 
        July 1, 1996, pursuant to a written contract which was binding 
        on June 29, 1994, and at all times thereafter before such 
        inurement occurred.

SEC. 743. TREATMENT OF HEALTH MAINTENANCE ORGANIZATIONS, PARENT 
              ORGANIZATIONS, AND HEALTH INSURANCE PURCHASING 
              COOPERATIVES.

    (a) Insurance Provided by Health Maintenance Organizations.--
            (1) In general.--Section 501(m) (relating to certain 
        organizations providing commercial-type insurance not exempt 
        from tax) is amended by adding at the end the following new 
        paragraph:
            ``(6) Certain activities provided by health maintenance 
        organizations not treated as commercial-type insurance.--For 
        purposes of this subsection, the provision of (or the arranging 
        for the provision of) medical care on a prepaid basis by a 
        health maintenance organization shall not be treated as 
        providing commercial-type insurance if (and only if) such care 
        is--
                    ``(A) care provided by such organization to its 
                members at its own facilities through health care 
                professionals who do not provide substantial health 
                care services other than on behalf of such 
                organization,
                    ``(B) care provided by a health care professional 
                to a member of such organization on a basis under which 
                substantially all of the risks of the rates of 
                utilization is assumed by the provider of such care,
                    ``(C) care (other than primary care) provided to a 
                member of such organization pursuant to a referral by 
                such organization, or
                    ``(D) emergency care provided to a member of such 
                organization at a location outside such member's area 
                of residence.''
            (2) Technical amendments.--
                    (A) Paragraph (3) of section 501(m) is amended by 
                striking subparagraph (B) and by redesignating 
                subparagraphs (C), (D), and (E) as subparagraphs (B), 
                (C), and (D), respectively.
                    (B) Paragraph (5) of section 501(m) is amended by 
                striking ``paragraph (3)(E)'' and inserting ``paragraph 
                (3)(D)''.
    (b) Treatment of Parent Organizations of Health Care Providers.--
Section 509(a) (defining private foundation) is amended by striking 
``and'' at the end of paragraph (3), by redesignating paragraph (4) as 
paragraph (5), and by inserting after paragraph (3) the following new 
paragraph:
            ``(4) an organization which is organized and operated for 
        the benefit of, and which directly or indirectly controls, an 
        organization described in section 170(b)(1)(A)(iii), and''.
    (c) Purchasing Cooperatives Exempt From Tax.--
            (1) In general.--Subsection (c) of section 501 (relating to 
        exemption from tax on corporations, certain trusts, etc.) is 
        amended by adding at the end the following new paragraph:
            ``(26)(A) Any health insurance purchasing cooperative 
        described in part III of subtitle D of title XXI of the Social 
        Security Act.
            ``(B) Such a cooperative shall not be exempt from tax 
        pursuant to any provision other than this paragraph.
            ``(C) Such a cooperative shall not be exempt from tax 
        unless--
                    ``(i) no part of the net earnings of such 
                cooperative inures to the benefit of any private 
                shareholder or individual,
                    ``(ii) no substantial part of the activities of 
                such cooperative is carrying on propaganda, or 
                otherwise attempting, to influence legislation (except 
                as otherwise provided in subsection (h)), and
                    ``(iii) such cooperative does not participate in, 
                or intervene in (including the publishing or 
                distributing of statements), any political campaign on 
                behalf of (or in opposition to) any candidate for 
                public office.''
            (2) Certain provisions applicable to organizations 
        described in section 501(c)(3) made applicable to purchasing 
        cooperatives.--Section 501 is amended by redesignating 
        subsection (o) as subsection (p) and by inserting after 
        subsection (n) the following new subsection:
    ``(o) Certain Provisions Made Applicable to Health Insurance 
Purchasing Cooperatives.--A health insurance purchasing cooperative 
described in subsection (c)(26) shall be treated--
            ``(1) as described in subsection (c)(3) for purposes of 
        applying subsection (h) (relating to expenditures by public 
        charities to influence legislation), section 4955 (relating to 
        taxes on political expenditures of section 501(c)(3) 
        organizations), and section 4958 (relating to private 
        inurement), and
            ``(2) as described in subsection (h)(4).''
    (d) Effective Date.--The amendments made by this section shall take 
effect on the date of the enactment of this Act.

SEC. 744. TAX TREATMENT OF TAXABLE ORGANIZATIONS PROVIDING HEALTH 
              INSURANCE AND OTHER PREPAID HEALTH CARE SERVICES.

    (a) General Rule.--Section 831 is amended by redesignating 
subsection (c) as subsection (d) and by inserting after subsection (b) 
the following new subsection:
    ``(c) Treatment of Organizations Providing Health Insurance and 
Other Prepaid Health Care Services.--
            ``(1) General rule.--Any organization to which this 
        subsection applies shall be taxable under this part in the same 
        manner as if it were an insurance company other than a life 
        insurance company.
            ``(2) Organizations to which subsection applies.--This 
        subsection shall apply to any organization--
                    ``(A) which is not exempt from taxation under this 
                subtitle,
                    ``(B) which is not taxable as a life insurance 
                company under part I of this subchapter,
                    ``(C) which is not an organization to which section 
                833 applies, and
                    ``(D) the primary and predominant business activity 
                of which during the taxable year consists of 1 or more 
                of the following:
                            ``(i) Issuing accident and health insurance 
                        contracts or the reinsuring of risks undertaken 
                        by other insurance companies under such 
                        contracts.
                            ``(ii) Operating as a health maintenance 
                        organization.
                            ``(iii) Entering into arrangements under 
                        which--
                                    ``(I) fixed payments or premiums 
                                are received as consideration for the 
                                organization's agreement to provide or 
                                arrange for the provision of health 
                                care services, regardless of how the 
                                health care services are provided or 
                                arranged to be provided, and
                                    ``(II) substantially all of the 
                                risks of the rates of utilization of 
                                such services is assumed by such 
                                organization or the provider of such 
                                services.
        In the case of an organization which has as a material business 
        activity the issuing of accident and health insurance contracts 
        or the reinsuring of risks undertaken by other insurance 
        companies under such contracts, the administering of accident 
        and health insurance contracts by such organization shall be 
        treated as part of such business activity for purposes of 
        subparagraph (D)(i).''
    (b) Effective Date.--
            (1) In general.--The amendment made by this section shall 
        apply to taxable years beginning after December 31, 1994.
            (2) Transitional rules.--
                    (A) Organizations to which paragraph applies.--This 
                paragraph shall apply to any organization to which 
                section 831(c) of the Internal Revenue Code of 1986 (as 
                added by subsection (a)) applies for such 
                organization's first taxable year beginning after 
                December 31, 1994; except that this paragraph shall not 
                apply if such organization treated itself as an 
                insurance company taxable under part II of subchapter L 
                of chapter 1 of such Code on its original Federal 
                income tax return for its taxable year beginning in 
                1992 and for all of its taxable years thereafter 
                beginning before January 1, 1995.
                    (B) Treatment of currently taxable companies.--
                Except as provided in regulations prescribed by the 
                Secretary of the Treasury or his delegate, in the case 
                of any organization to which this paragraph applies--
                            (i) the amendments made by this section 
                        shall be treated as a change in the method of 
                        accounting, and
                            (ii) all adjustments required to be taken 
                        into account under section 481 of the Internal 
                        Revenue Code of 1986 shall be taken into 
                        account for such company's first taxable year 
                        beginning after December 31, 1994.
                    (C) Treatment of currently tax-exempt companies.--
                Except as provided in regulations prescribed by the 
                Secretary of the Treasury or his delegates, in the case 
                of any organization to which this paragraph applies and 
                which was exempt from tax under chapter 1 of the 
                Internal Revenue Code of 1986 for such organization's 
                last taxable year beginning before January 1, 1995--
                            (i) no adjustment shall be made under 
                        section 481 (or any other provision) of such 
                        Code on account of a change in its method of 
                        accounting required by this section for its 
                        first taxable year beginning after December 31, 
                        1994, and
                            (ii) for purposes of determining gain or 
                        loss, the adjusted basis of any asset held by 
                        such organization on the first day of such 
                        taxable year shall be treated as equal to its 
                        fair market value as of such day.

SEC. 745. ORGANIZATIONS SUBJECT TO SECTION 833.

    (a) In General.--Section 833(c) (relating to organization to which 
section applies) is amended by adding at the end the following new 
paragraph:
            ``(4) Treatment as existing blue cross or blue shield 
        organization.--
                    ``(A) In general.--Paragraph (2) shall be applied 
                to an organization described in subparagraph (B) as if 
                it were a Blue Cross or Blue Shield organization.
                    ``(B) Applicable organization.--An organization is 
                described in this subparagraph if it--
                            ``(i) is organized under, and governed by, 
                        State laws which are specifically and 
                        exclusively applicable to not-for-profit health 
                        insurance or health service type organizations, 
                        and
                            ``(ii) is not a Blue Cross or Blue Shield 
                        organization or health maintenance 
                        organization.''
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 1986.

SEC. 746. TAX EXEMPTION FOR HIGH-RISK INSURANCE POOLS.

    Subsection (c) of section 501 (relating to list of exempt 
organizations) is amended by adding at the end the following new 
paragraph:
    ``(27)(A) In the case of taxable years beginning after December 31, 
1989, and before January 1, 1997, a qualified high risk health 
insurance pool.
    ``(B) For purposes of subparagraph (A), the term `qualified high 
risk health insurance pool' means an entity--
            ``(i) which was established by a State or political 
        subdivision thereof to provide health insurance on a nonprofit 
        basis to persons unable to obtain health insurance because of 
        health conditions,
            ``(ii) with respect to which the State or political 
        subdivision--
                    ``(I) participates in the ongoing governance of the 
                entity, and
                    ``(II) subsidizes the operation of the entity, and
            ``(iii) no part of the net earnings of which inure to the 
        benefit of any private shareholder, member, or individual.''

           PART II--TAX TREATMENT OF SECTION 501(c)(3) BONDS

SEC. 748. TAX TREATMENT OF 501(c)(3) BONDS SIMILAR TO GOVERNMENTAL 
              BONDS.

    (a) In General.--Subsection (a) of section 150 (relating to 
definitions and special rules) is amended by striking paragraphs (2) 
and (4), by redesignating paragraphs (5) and (6) as paragraphs (4) and 
(5), respectively, and by inserting after paragraph (1) the following 
new paragraph:
            ``(2) Exempt person.--
                    ``(A) In general.--The term `exempt person' means--
                            ``(i) a governmental unit, or
                            ``(ii) a 501(c)(3) organization, but only 
                        with respect to its activities which do not 
                        constitute unrelated trades or businesses as 
                        determined by applying section 513(a).
                    ``(B) Governmental unit not to include federal 
                government.--The term `governmental unit' does not 
                include the United States or any agency or 
                instrumentality thereof.
                    ``(C) 501(c)(3) organization.--The term `501(c)(3) 
                organization' means any organization described in 
                section 501(c)(3) and exempt from tax under section 
                501(a).''
    (b) Repeal of Qualified 501(c)(3) Bond Designation.--Section 145 
(relating to qualified 501(c)(3) bonds) is repealed.
    (c) Conforming Amendments.--
            (1) Paragraph (3) of section 141(b) is amended--
                    (A) by striking ``government use'' in subparagraph 
                (A)(ii)(I) and subparagraph (B)(ii) and inserting 
                ``exempt person use'',
                    (B) by striking ``a government use'' in 
                subparagraph (B) and inserting ``an exempt person 
                use'',
                    (C) by striking ``related business use'' in 
                subparagraph (A)(ii)(II) and subparagraph (B) and 
                inserting ``related private business use'',
                    (D) by striking ``related business use'' in the 
                heading of subparagraph (B) and inserting ``related 
                private business use'', and
                    (E) by striking ``government use'' in the heading 
                thereof and inserting ``exempt person use''.
            (2) Subparagraph (A) of section 141(b)(6) is amended by 
        striking ``a governmental unit'' and inserting ``an exempt 
        person''.
            (3) Paragraph (7) of section 141(b) is amended--
                    (A) by striking ``government use'' and inserting 
                ``exempt person use'', and
                    (B) by striking ``Government use'' in the heading 
                thereof and inserting ``Exempt person use''.
            (4) Section 141(b) is amended by striking paragraph (9).
            (5) Paragraph (1) of section 141(c) is amended by striking 
        ``governmental units'' and inserting ``exempt persons''.
            (6) Section 141 is amended by redesignating subsection (e) 
        as subsection (f) and by inserting after subsection (d) the 
        following new subsection:
    ``(e) Certain Issues Used To Provide Residential Rental Housing for 
Family Units.--
            ``(1) In general.--Except as provided in paragraph (2), for 
        purposes of this title, the term `private activity bond' 
        includes any bond issued as part of an issue if any portion of 
        the net proceeds of the issue are to be used (directly or 
        indirectly) by an exempt person described in section 
        150(a)(2)(A)(ii) to provide residential rental property for 
        family units. This paragraph shall not apply if the bond would 
        not be a private activity bond if the section 501(c)(3) 
        organization were not an exempt person.
            ``(2) Exception for bonds used to provide qualified 
        residential rental projects.--Paragraph (1) shall not apply to 
        any bond issued as part of an issue if the portion of such 
        issue which is to be used as described in paragraph (1) is to 
        be used to provide--
                    ``(A) a residential rental property for family 
                units if the first use of such property is pursuant to 
                such issue,
                    ``(B) qualified residential rental projects (as 
                defined in section 142(d)), or
                    ``(C) property which is to be substantially 
                rehabilitated in a rehabilitation beginning within the 
                2-year period ending 1 year after the date of the 
                acquisition of such property.
            ``(3) Substantial rehabilitation.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), rules similar to the rules of section 
                47(c)(1)(C) shall apply in determining for purposes of 
                paragraph (2)(C) whether property is substantially 
                rehabilitated.
                    ``(B) Exception.--For purposes of subparagraph (A), 
                clause (ii) of section 47(c)(1)(C) shall not apply, but 
                the Secretary may extend the 24-month period in section 
                47(c)(1)(C)(i) where appropriate due to circumstances 
                not within the control of the owner.
            ``(4) Certain property treated as new property.--Solely for 
        purposes of determining under paragraph (2)(A) whether the 1st 
        use of property is pursuant to tax-exempt financing--
                    ``(A) In general.--If--
                            ``(i) the 1st use of property is pursuant 
                        to taxable financing,
                            ``(ii) there was a reasonable expectation 
                        (at the time such taxable financing was 
                        provided) that such financing would be replaced 
                        by tax-exempt financing, and
                            ``(iii) the taxable financing is in fact so 
                        replaced within a reasonable period after the 
                        taxable financing was provided,
                then the 1st use of such property shall be treated as 
                being pursuant to the tax-exempt financing.
                    ``(B) Special rule where no operating state or 
                local program for tax-exempt financing.--If, at the 
                time of the 1st use of property, there was no operating 
                State or local program for tax-exempt financing of the 
                property, the 1st use of the property shall be treated 
                as pursuant to the 1st tax-exempt financing of the 
                property.
                    ``(C) Definitions.--For purposes of this 
                paragraph--
                            ``(i) Tax-exempt financing.--The term `tax-
                        exempt financing' means financing provided by 
                        tax-exempt bonds.
                            ``(ii) Taxable financing.--The term 
                        `taxable financing' means financing which is 
                        not tax-exempt financing.''
            (7) Section 141(f), as redesignated by paragraph (6), is 
        amended--
                    (A) by adding ``or'' at the end of subparagraph 
                (E),
                    (B) by striking ``, or'' at the end of subparagraph 
                (F), and inserting in lieu thereof a period, and
                    (C) by striking subparagraph (G).
            (8) The last sentence of section 144(b)(1) is amended by 
        striking ``(determined'' and all that follows to the period.
            (9) Clause (ii) of section 144(c)(2)(C) is amended by 
        striking ``a governmental unit'' and inserting ``an exempt 
        person''.
            (10) Section 146(g) is amended--
                    (A) by striking paragraph (2), and
                    (B) by redesignating the remaining paragraphs after 
                paragraph (1) as paragraphs (2) and (3), respectively.
            (11) The heading of section 146(k)(3) is amended by 
        striking ``governmental'' and inserting ``exempt person''.
            (12) The heading of section 146(m) is amended by striking 
        ``Government'' and inserting ``Exempt Person''.
            (13) Subsection (h) of section 147 is amended to read as 
        follows:
    ``(h) Certain Rules Not To Apply to Mortgage Revenue Bonds and 
Qualified Student Loan Bonds.--Subsections (a), (b), (c), and (d) shall 
not apply to any qualified mortgage bond, qualified veterans' mortgage 
bond, or qualified student loan bond.''
            (14) Section 147 is amended by striking paragraph (4) of 
        subsection (b) and redesignating paragraph (5) of such 
        subsection as paragraph (4).
            (15) Subparagraph (F) of section 148(d)(3) is amended--
                    (A) by striking ``or which is a qualified 501(c)(3) 
                bond'', and
                    (B) by striking ``governmental use bonds and 
                qualified 501(c)(3)'' in the heading thereof and 
                inserting ``exempt person''.
            (16) Subclause (II) of section 148(f)(4)(B)(ii) is amended 
        by striking ``(other than a qualified 501(c)(3) bond)''.
            (17) Clause (iv) of section 148(f)(4)(C) is amended--
                    (A) by striking ``a governmental unit or a 
                501(c)(3) organization'' each place it appears and 
                inserting ``an exempt person'',
                    (B) by striking ``qualified 501(c)(3) bonds,'', and
                    (C) by striking the comma after ``private activity 
                bonds'' the first place it appears.
            (18) Subparagraph (A) of section 148(f)(7) is amended by 
        striking ``(other than a qualified 501(c)(3) bond)''.
            (19) Paragraph (2) of section 149(d) is amended--
                    (A) by striking ``(other than a qualified 501(c)(3) 
                bond)'', and
                    (B) by striking ``Certain private'' in the heading 
                thereof and inserting ``Private''.
            (20) Section 149(e)(2) is amended--
                    (A) by striking ``which is not a private activity 
                bond'' in the second sentence and inserting ``which is 
                a bond issued for an exempt person described in section 
                150(a)(2)(A)(i)'', and
                    (B) by adding at the end the following new 
                sentence: ``Subparagraph (D) shall not apply to any 
                bond which is not a private activity bond but which 
                would be such a bond if the 501(c)(3) organization 
                using the proceeds thereof were not an exempt person.''
            (21) The heading of subsection (b) of section 150 is 
        amended by striking ``Tax-Exempt Private Activity Bonds'' and 
        inserting ``Certain Tax-Exempt Bonds''.
            (22) Paragraph (3) of section 150(b) is amended--
                    (A) by inserting ``owned by a 501(c)(3) 
                organization'' after ``any facility'' in subparagraph 
                (A),
                    (B) by striking ``any private activity bond which, 
                when issued, purported to be a tax-exempt qualified 
                501(c)(3) bond'' in subparagraph (A) and inserting 
                ``any bond which, when issued, purported to be a tax-
                exempt bond, and which would be a private activity bond 
                if the 501(c)(3) organization using the proceeds 
                thereof were not an exempt person'', and
                    (C) by striking the heading thereof and inserting 
                ``Bonds for exempt persons other than governmental 
                units.--''.
            (23) Paragraph (5) of section 150(b) is amended--
                    (A) by striking ``private activity'' in 
                subparagraph (A),
                    (B) by inserting ``and which would be a private 
                activity bond if the 501(c)(3) organization using the 
                proceeds thereof were not an exempt person'' after 
                ``tax-exempt bond'' in subparagraph (A),
                    (C) by striking subparagraph (B) and inserting the 
                following new subparagraph:
                    ``(B) such facility is required to be owned by an 
                exempt person, and'', and
                    (D) by striking ``governmental units or 501(c)(3) 
                organizations'' in the heading thereof and inserting 
                ``exempt persons''.
            (24) Section 150 is amended by adding at the end the 
        following new subsection:
    ``(f) Certain Rules To Apply to Bonds for Exempt Persons Other Than 
Governmental Units.--
            ``(1) In general.--Nothing in section 103(a) or any other 
        provision of law shall be construed to provide an exemption 
        from Federal income tax for interest on any bond which would be 
        a private activity bond if the 501(c)(3) organization using the 
        proceeds thereof were not an exempt person unless such bond 
        satisfies the requirements of subsections (b) and (f) of 
        section 147.
            ``(2) Special rule for pooled financing of 501(c)(3) 
        organization.--
                    ``(A) In general.--At the election of the issuer, a 
                bond described in paragraph (1) shall be treated as 
                meeting the requirements of section 147(b) if such bond 
                meets the requirements of subparagraph (B).
                    ``(B) Requirements.--A bond meets the requirements 
                of this subparagraph if--
                            ``(i) 95 percent or more of the net 
                        proceeds of the issue of which such bond is a 
                        part are to be used to make or finance loans to 
                        2 or more 501(c)(3) organizations or 
                        governmental units for acquisition of property 
                        to be used by such organizations,
                            ``(ii) each loan described in clause (i) 
                        satisfies the requirements of section 147(b) 
                        (determined by treating each loan as a separate 
                        issue),
                            ``(iii) before such bond is issued, a 
                        demand survey was conducted which shows a 
                        demand for financing greater than an amount 
                        equal to 120 percent of the lendable proceeds 
                        of such issue, and
                            ``(iv) 95 percent or more of the net 
                        proceeds of such issue are to be loaned to 
                        501(c)(3) organizations or governmental units 
                        within 1 year of issuance and, to the extent 
                        there are any unspent proceeds after such 1-
                        year period, bonds issued as part of such issue 
                        are to be redeemed as soon as possible 
                        thereafter (and in no event later than 18 
                        months after issuance).
                A bond shall not meet the requirements of this 
                subparagraph if the maturity date of any bond issued as 
                part of such issue is more than 30 years after the date 
                on which the bond was issued (or, in the case of a 
                refunding or series of refundings, the date on which 
                the original bond was issued).''
            (25) Section 1302 of the Tax Reform Act of 1986 is 
        repealed.
            (26) Subparagraph (C) of section 57(a)(5) is amended by 
        striking clause (ii) and redesignating clauses (iii) and (iv) 
        as clauses (ii) and (iii), respectively.
            (27) Paragraph (3) of section 103(b) is amended by 
        inserting ``and section 150(f)'' after ``section 149''.
            (28) Paragraph (3) of section 265(b) is amended--
                    (A) by striking clause (ii) of subparagraph (B) and 
                inserting the following:
                            ``(ii) Certain bonds not treated as private 
                        activity bonds.--For purposes of clause 
                        (i)(II), there shall not be treated as a 
                        private activity bond any obligation issued to 
                        refund (or which is part of a series of 
                        obligations issued to refund) an obligation 
                        issued before August 8, 1986, which was not an 
                        industrial development bond (as defined in 
                        section 103(b)(2) as in effect on the day 
                        before the date of the enactment of the Tax 
                        Reform Act of 1986) or a private loan bond (as 
                        defined in section 103(o)(2)(A), as so in 
                        effect, but without regard to any exemption 
                        from such definition other than section 
                        103(o)(2)(A)).''; and
                    (B) by striking ``(other than a qualified 501(c)(3) 
                bond, as defined in section 145)'' in subparagraph 
                (C)(ii)(I).
    (d) Effective Date.--The amendments made by this section shall 
apply to bonds (including refunding bonds) issued after December 31, 
1994.

   Subtitle E--Tax Treatment of Long-Term Care Insurance and Services

SEC. 751. QUALIFIED LONG-TERM CARE SERVICES TREATED AS MEDICAL CARE.

    (a) General Rule.--Paragraph (1) of section 213(d) (defining 
medical care) is amended by striking ``or'' at the end of subparagraph 
(B), by redesignating subparagraph (C) as subparagraph (D), and by 
inserting after subparagraph (B) the following new subparagraph:
                    ``(C) for qualified long-term care services (as 
                defined in subsection (g)), or''.
    (b) Qualified Long-Term Care Services Defined.--Section 213 
(relating to the deduction for medical, dental, etc., expenses) is 
amended by adding at the end the following new subsection:
    ``(g) Qualified Long-Term Care Services.--For purposes of this 
section--
            ``(1) In general.--The term `qualified long-term care 
        services' means necessary diagnostic, curing, mitigating, 
        treating, preventive, therapeutic, and rehabilitative services, 
        and maintenance and personal care services (whether performed 
        in a residential or nonresidential setting) which--
                    ``(A) are required by an individual during any 
                period the individual is an incapacitated individual 
                (as defined in paragraph (2)),
                    ``(B) have as their primary purpose--
                            ``(i) the provision of needed assistance 
                        with 1 or more activities of daily living (as 
                        defined in paragraph (3)), or
                            ``(ii) protection from threats to health 
                        and safety due to severe cognitive impairment, 
                        and
                    ``(C) are provided pursuant to a continuing plan of 
                care prescribed by a licensed professional (as defined 
                in paragraph (4)).
            ``(2) Incapacitated individual.--The term `incapacitated 
        individual' means any individual who--
                    ``(A) is unable to perform, without substantial 
                assistance from another individual (including 
                assistance involving cueing or substantial 
                supervision), at least 2 activities of daily living as 
                defined in paragraph (3), or
                    ``(B) has severe cognitive impairment as defined by 
                the Secretary in consultation with the Secretary of 
                Health and Human Services.
        Such term shall not include any individual otherwise meeting 
        the requirements of the preceding sentence unless a licensed 
        professional within the preceding 12-month period has certified 
        that such individual meets such requirements.
            ``(3) Activities of daily living.--Each of the following is 
        an activity of daily living:
                    ``(A) Eating.
                    ``(B) Toileting.
                    ``(C) Transferring.
                    ``(D) Bathing.
                    ``(E) Dressing.
            ``(4) Licensed professional.--The term `licensed 
        professional' means--
                    ``(A) a physician or registered professional nurse, 
                or
                    ``(B) any other individual who meets such 
                requirements as may be prescribed by the Secretary 
                after consultation with the Secretary of Health and 
                Human Services.
            ``(5) Certain services not included.--The term `qualified 
        long-term care services' shall not include any services 
        provided to an individual--
                    ``(A) by a relative (directly or through a 
                partnership, corporation, or other entity) unless the 
                relative is a licensed professional with respect to 
                such services, or
                    ``(B) by a corporation or partnership which is 
                related (within the meaning of section 267(b) or 
                707(b)) to the individual.
        For purposes of this paragraph, the term `relative' means an 
        individual bearing a relationship to the individual which is 
        described in paragraphs (1) through (8) of section 152(a).''
    (c) Technical Amendments.--
            (1) Subparagraph (D) of section 213(d)(1) (as redesignated 
        by subsection (a)) is amended to read as follows:
                    ``(D) for insurance (including amounts paid as 
                premiums under part B of title XVIII of the Social 
                Security Act, relating to supplementary medical 
                insurance for the aged) covering medical care referred 
                to in--
                            ``(i) subparagraphs (A) and (B), or
                            ``(ii) subparagraph (C), but only if such 
                        insurance is provided under a qualified long-
                        term care insurance policy (as defined in 
                        section 7702B(b)) and the amount paid for such 
                        insurance is not disallowed under section 
                        7702B(d)(4).''
            (2) Paragraph (6) of section 213(d) is amended--
                    (A) by striking ``subparagraphs (A) and (B)'' and 
                inserting ``subparagraph (A), (B), and (C)'', and
                    (B) by striking ``paragraph (1)(C)'' in 
                subparagraph (A) and inserting ``paragraph (1)(D)''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1995.

SEC. 752. TREATMENT OF LONG-TERM CARE INSURANCE.

    (a) General Rule.--Chapter 79 (relating to definitions) is amended 
by inserting after section 7702A the following new section:

``SEC. 7702B. TREATMENT OF LONG-TERM CARE INSURANCE.

    ``(a) In General.--For purposes of this title--
            ``(1) a qualified long-term care insurance policy (as 
        defined in subsection (b)) shall be treated as an accident or 
        health insurance contract,
            ``(2) amounts (other than policyholder dividends (as 
        defined in section 808) or premium refunds) received under a 
        qualified long-term care insurance policy shall be treated as 
        amounts received for personal injuries and sickness and shall 
        be treated as reimbursement for expenses actually incurred for 
        medical care (as defined in section 213(d)),
            ``(3) except to the extent provided in section 106(c), any 
        plan of an employer providing coverage under a qualified long-
        term care insurance policy shall be treated as an accident or 
        health plan with respect to such coverage,
            ``(4) except as provided in subsection (d)(4), amounts paid 
        for a qualified long-term care insurance policy providing the 
        benefits described in subsection (b)(6)(B) shall be treated as 
        payments made for insurance for purposes of section 
        213(d)(1)(D), and
            ``(5) a qualified long-term care insurance policy shall be 
        treated as a guaranteed renewable contract subject to the rules 
        of section 816(e).
    ``(b) Qualified Long-Term Care Insurance Policy.--For purposes of 
this title--
            ``(1) In general.--The term `qualified long-term care 
        insurance policy' means any certified long-term care policy (as 
        defined in section 21011(b)(2) of the Social Security Act) 
        that--
                    ``(A) limits benefits under such policy to 
                individuals who are certified by a licensed 
                professional (as defined in section 213(g)(4)) within 
                the preceding 12-month period--
                            ``(i) as being unable to perform, without 
                        substantial assistance from another individual 
                        (including assistance involving cueing or 
                        substantial supervision), 2 or more activities 
                        of daily living (as defined in section 
                        213(g)(3)), or
                            ``(ii) having a severe cognitive impairment 
                        (as defined in section 213(g)(2)(B)), and
                    ``(B) satisfies the requirements of paragraphs (2), 
                (3), (4), (5), and (6).
            ``(2) Premium requirements.--The requirements of this 
        paragraph are met with respect to a policy if such policy 
        provides that premium payments may not be made earlier than the 
        date such payments would have been made if the contract 
        provided for level annual payments over the life expectancy of 
        the insured or 20 years, whichever is shorter. A policy shall 
        not be treated as failing to meet the requirements of the 
        preceding sentence solely by reason of a provision in the 
        policy providing for a waiver of premiums if the insured 
        becomes an individual certified in accordance with paragraph 
        (1)(A).
            ``(3) Prohibition of cash value.--The requirements of this 
        paragraph are met if the policy does not provide for a cash 
        value or other money that can be paid, assigned, pledged as 
        collateral for a loan, or borrowed, other than as provided in 
        paragraph (4).
            ``(4) Refunds of premiums and dividends.--The requirements 
        of this paragraph are met with respect to a policy if such 
        policy provides that--
                    ``(A) policyholder dividends are required to be 
                applied as a reduction in future premiums or, to the 
                extent permitted under paragraph (6), to increase 
                benefits described in subsection (a)(2),
                    ``(B) refunds of premiums upon a partial surrender 
                or a partial cancellation are required to be applied as 
                a reduction in future premiums, and
                    ``(C) any refund on the death of the insured, or on 
                a complete surrender or cancellation of the policy, 
                cannot exceed the aggregate premiums paid under the 
                contract.
        Any refund on a complete surrender or cancellation of the 
        policy shall be includible in gross income to the extent that 
        any deduction or exclusion was allowable with respect to the 
        premiums.
            ``(5) Coordination with other entitlements.--The 
        requirements of this paragraph are met with respect to a policy 
        if such policy does not pay, or provide reimbursement for, 
        expenses incurred to the extent that such expenses are also 
        paid or reimbursed under title XVIII of the Social Security Act 
        or are paid or reimbursed under a certified standard health 
        plan (as defined in section 21011(a)(2) of the Social Security 
        Act).
            ``(6) Maximum benefit.--
                    ``(A) In general.--The requirements of this 
                paragraph are met if the benefits payable under the 
                policy for any period (whether on a periodic basis or 
                otherwise) may not exceed the dollar amount in effect 
                for such period.
                    ``(B) Nonreimbursement payments permitted.--
                Benefits shall include all payments described in 
                subsection (a)(2) to or on behalf of an insured 
                individual without regard to the expenses incurred 
                during the period to which the payments relate. For 
                purposes of section 213(a), such payments shall be 
                treated as compensation for expenses paid for medical 
                care.
                    ``(C) Dollar amount.--The dollar amount in effect 
                under this paragraph shall be $150 per day (or the 
                equivalent amount within the calendar year in the case 
                of payments on other than a per diem basis).
                    ``(D) Adjustments for increased costs.--
                            ``(i) In general.--In the case of any 
                        calendar year after 1996, the dollar amount in 
                        effect under subparagraph (C) for any period or 
                        portion thereof occurring during such calendar 
                        year shall be equal to the sum of--
                                    ``(I) the amount in effect under 
                                subparagraph (C) for the preceding 
                                calendar year (after application of 
                                this subparagraph), plus
                                    ``(II) the product of the amount 
                                referred to in subclause (I) multiplied 
                                by the cost-of-living adjustment for 
                                the calendar year.
                            ``(ii) Cost-of-living adjustment.--For 
                        purposes of clause (i), the cost-of-living 
                        adjustment for any calendar year is the 
                        percentage (if any) by which the cost index 
                        under clause (iii) for the preceding calendar 
                        year exceeds such index for the second 
                        preceding calendar year.
                            ``(iii) Cost index.--The Secretary, in 
                        consultation with the Secretary of Health and 
                        Human Services, shall before January 1, 1997, 
                        establish a cost index to measure increases in 
                        costs of nursing home and similar facilities. 
                        The Secretary may from time to time revise such 
                        index to the extent necessary to accurately 
                        measure increases or decreases in such costs.
                            ``(iv) Special rule for calendar year 
                        1997.--Notwithstanding clause (ii), for 
                        purposes of clause (i), the cost-of-living 
                        adjustment for calendar year 1997 is the sum of 
                        1.5 percent plus the percentage by which the 
                        CPI for calendar year 1996 (as defined in 
                        section 1(f)(4)) exceeds the CPI for calendar 
                        year 1995 (as so defined).
                    ``(E) Period.--For purposes of this paragraph, a 
                period begins on the date that an individual has a 
                condition which would qualify for certification under 
                subsection (b)(1)(A) and ends on the earlier of the 
                date upon which--
                            ``(i) such individual has not been so 
                        certified within the preceding 12-months, or
                            ``(ii) the individual's condition ceases to 
                        be such as to qualify for certification under 
                        subsection (b)(1)(A).
                    ``(F) Aggregation rule.--For purposes of this 
                paragraph, all policies issued with respect to the same 
                insured shall be treated as one policy.
    ``(c) Treatment of Long-Term Care Insurance Policies.--For purposes 
of this title, any amount received or coverage provided under a long-
term care insurance policy that is not a qualified long-term care 
insurance policy shall not be treated as an amount received for 
personal injuries or sickness or provided under an accident or health 
plan and shall not be treated as excludible from gross income under any 
provision of this title.
    ``(d) Treatment of Coverage Provided as Part of a Life Insurance 
Contract.--Except as otherwise provided in regulations prescribed by 
the Secretary, in the case of any long-term care insurance coverage 
(whether or not qualified) provided by rider on a life insurance 
contract--
            ``(1) In general.--This section shall apply as if the 
        portion of the contract providing such coverage is a separate 
        contract or policy.
            ``(2) Premiums and charges for long-term care coverage.--
        Premium payments for coverage under a long-term care insurance 
        policy and charges against the life insurance contract's cash 
        surrender value (within the meaning of section 7702(f)(2)(A)) 
        for such coverage shall be treated as premiums for purposes of 
        subsection (b)(2).
            ``(3) Application of section 7702.--Section 7702(c)(2) 
        (relating to the guideline premium limitation) shall be applied 
        by increasing the guideline premium limitation with respect to 
        a life insurance contract, as of any date--
                    ``(A) by the sum of any charges (but not premium 
                payments) described in paragraph (2) made to that date 
                under the contract, less
                    ``(B) any such charges the imposition of which 
                reduces the premiums paid for the contract (within the 
                meaning of section 7702(f)(1)).
            ``(4) Application of section 213.--No deduction shall be 
        allowed under section 213(a) for charges against the life 
        insurance contract's cash surrender value described in 
        paragraph (2), unless such charges are includible in income as 
        a result of the application of section 72(e)(10) and the 
        coverage provided by the rider is a qualified long-term care 
        insurance policy under subsection (b).
            ``(5) Amount of distribution under rider.--This subsection 
        shall not apply to any rider on a life insurance contract 
        unless the percentage reduction in the cash surrender value of 
        the contract by reason of any payment under the rider does not 
        exceed the percentage reduction in the death benefit payable 
        under the contract by reason of the payment.
For purposes of this subsection, the term `portion' means only the 
terms and benefits under a life insurance contract that are in addition 
to the terms and benefits under the contract without regard to the 
coverage under a long-term care insurance policy, except that the 
coverage under a rider described in this subsection shall not fail to 
be treated as such an addition by reason of a reduction in the 
contract's death benefit or cash surrender value resulting from any 
payment under the rider.
    ``(e) Regulations.--The Secretary shall prescribe such regulations 
as may be necessary to carry out the requirements of this section, 
including regulations to prevent the avoidance of this section by 
providing long-term care insurance coverage under a life insurance 
contract and to provide for the proper allocation of amounts between 
the long-term care and life insurance portions of a contract.''
    (b) Employer Contributions to Long-Term Care Coverage Not 
Excluded.--
            (1) In general.--Section 106 (relating to contributions by 
        employer to accident and health plans), as amended by section 
        7202, is amended by adding at the end the following new 
        subsection:
    ``(c) Exception for Long-Term Care Insurance.--Subsection (a) shall 
not apply to employer-provided coverage under any qualified long-term 
care insurance policy.''
            (2) Employment tax treatment.--Each of the following 
        provisions, as amended by section 7202(b), is amended by 
        striking ``section 106(b)'' and inserting ``subsection (b) or 
        (c) of section 106'':
                    (A) The last sentence of section 3121(a).
                    (B) The last sentence of section 209(a) of the 
                Social Security Act.
                    (C) The last sentence of section 3231(e)(1).
                    (D) The last sentence of section 3306(b).
                    (E) The last sentence of section 3401(a).
    (c) Clerical Amendment.--The table of sections for chapter 79 is 
amended by inserting after the item relating to section 7702A the 
following new item:

                              ``Sec. 7702B. Treatment of long-term care 
                                        insurance.''
    (d) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply to policies issued after December 31, 1995, except that a 
        policy issued before January 1, 1996, which, on January 1, 
        1996, satisfies the requirements of a qualified long-term care 
        insurance policy as set forth in section 7702B(b) of the 
        Internal Revenue Code of 1986 shall be treated as having been 
        issued on January 1, 1996.
            (2) Transition rule.--If, after the date of enactment of 
        this Act and before January 1, 1996, a policy providing for 
        long-term care insurance coverage is exchanged solely for a 
        qualified long-term care insurance policy (as defined in 
        section 7702B(b) of such code), no gain or loss shall be 
        recognized on the exchange, except that gain (if any) shall be 
        recognized to the extent of the sum of the money and the fair 
        market value of the other property received. For purposes of 
        this paragraph, the cancellation of a policy providing for 
        long-term care insurance coverage and reinvestment of the 
        cancellation proceeds in a qualified long-term care insurance 
        policy within 60 days thereafter shall be treated as an 
        exchange.
            (3) Issuance of rider not treated as material change.--For 
        purposes of applying section 101(f), 7702, or 7702A of such 
        Code to any contract, the issuance of a rider on a life 
        insurance contract providing long-term care insurance coverage 
        shall not be treated as a modification or material change of 
        such contract.

SEC. 753. TAX TREATMENT OF ACCELERATED DEATH BENEFITS UNDER LIFE 
              INSURANCE CONTRACTS.

    (a) General Rule.--Section 101 (relating to certain death benefits) 
is amended by adding at the end the following new subsection:
    ``(g) Treatment of Certain Accelerated Death Benefits.--
            ``(1) In general.--For purposes of this section, any amount 
        received under a life insurance contract on the life of an 
        insured who is a terminally ill individual shall be treated as 
        an amount paid by reason of the death of such insured.
            ``(2) Necessary conditions.--
                    ``(A) In general.--Paragraph (1) shall not apply to 
                any amount received unless--
                            ``(i) the total amount received is not less 
                        than the present value (determined under 
                        subparagraph (B)) of the reduction in the death 
                        benefit otherwise payable in the event of the 
                        death of the insured, and
                            ``(ii) the percentage reduction in the cash 
                        surrender value of the contract by reason of 
                        the distribution does not exceed the percentage 
                        reduction in the death benefit payable under 
                        the contract by reason of such distribution.
                    ``(B) Present value.--The present value of the 
                reduction in the death benefit shall be determined by--
                            ``(i) using a discount rate which is based 
                        on an interest rate which does not exceed the 
                        highest interest rate set forth in subparagraph 
                        (C), and
                            ``(ii) assuming that the death benefit (or 
                        the portion thereof) would have been paid on 
                        the date which is 12 months after the date of 
                        the certification referred to in paragraph (3).
                    ``(C) Rates.--The interest rates set forth in this 
                subparagraph are the following:
                            ``(i) the 90-day Treasury bill yield,
                            ``(ii) the rate described as Moody's 
                        Corporate Bond Yield Average-Monthly Average 
                        Corporates as published by Moody's Investors 
                        Service, Inc., or any successor thereto, for 
                        the calendar month ending 2 months before the 
                        date on which the rate is determined, and
                            ``(iii) the rate used to compute the cash 
                        surrender values under the contract during the 
                        applicable period plus 1 percent per annum.
                    ``(D) Special rules relating to liens.--If a lien 
                is imposed against a life insurance contract with 
                respect to any amount referred to in paragraph (1)--
                            ``(i) for purposes of subparagraph (A), the 
                        amount of such lien shall be treated as a 
                        reduction (at the time of receipt) in the death 
                        benefit or cash surrender value to the extent 
                        that such benefit or value, as the case may be, 
                        is (or may become) subject to the lien, and
                            ``(ii) paragraph (1) shall not apply to the 
                        amount received unless any rate of interest 
                        with respect to any amount in connection with 
                        which such lien is imposed does not exceed the 
                        highest rate set forth in subparagraph (C).
            ``(3) Terminally ill individual.--For purposes of this 
        subsection, the term `terminally ill individual' means an 
        individual who the insurer has determined, after receipt of an 
        acceptable certification by a licensed physician, has an 
        illness or physical condition which can reasonably be expected 
        to result in death within 12 months after the date of 
        certification.
            ``(4) Exception for business-related policies.--This 
        subsection shall not apply in the case of any amount paid to 
        any taxpayer other than the insured if such taxpayer has an 
        insurable interest with respect to the life of the insured by 
        reason of the insured being a director, officer, or employee of 
        the taxpayer or by reason of the insured having a financial 
        interest in any trade or business carried on by the taxpayer.''
    (b) Effective Dates.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendment made by this section shall apply to amounts received 
        after the date of the enactment of this Act.
            (2) Delay in application of discount rules.--Clause (i) of 
        section 101(g)(2)(A) of the Internal Revenue Code of 1986 shall 
        not apply to any amount received before January 1, 1995.
            (3) Issuance of rider not treated as material change.--For 
        purposes of applying section 101(f), 7702, or 7702A of the 
        Internal Revenue Code of 1986 to any contract, the issuance of 
        a qualified accelerated death benefit rider (as defined in 
        section 818(g) of such Code (as added by this Act)) shall not 
        be treated as a modification or material change of such 
        contract.

SEC. 754. TAX TREATMENT OF COMPANIES ISSUING QUALIFIED ACCELERATED 
              DEATH BENEFIT RIDERS.

    (a) Qualified Accelerated Death Benefit Riders Treated as Life 
Insurance.--Section 818 (relating to other definitions and special 
rules) is amended by adding at the end the following new subsection:
    ``(g) Qualified Accelerated Death Benefit Riders Treated as Life 
Insurance.--For purposes of this part--
            ``(1) In general.--Any reference to a life insurance 
        contract shall be treated as including a reference to a 
        qualified accelerated death benefit rider on such contract.
            ``(2) Qualified accelerated death benefit riders.--For 
        purposes of this subsection, the term `qualified accelerated 
        death benefit rider' means any rider on a life insurance 
        contract which provides for a distribution to an individual 
        upon the insured becoming a terminally ill individual (as 
        defined in section 101(g)(3)).''
    (b) Effective Date.--The amendments made by this section shall take 
effect on January 1, 1995.

                  Subtitle F--Health Care Trust Funds

SEC. 761. ESTABLISHMENT OF HEALTH CARE TRUST FUNDS.

    (a) In General.--Subchapter A of chapter 98 (relating to 
establishment of trust funds) is amended by adding at the end the 
following new part:

                   ``PART II--HEALTH CARE TRUST FUNDS

                              ``Sec. 9551. Health Security Trust Fund.
                              ``Sec. 9552. Graduate Medical Education 
                                        and Academic Health Centers 
                                        Trust Fund.
                              ``Sec. 9553. Biomedical and Behavioral 
                                        Research Trust Fund.

``SEC. 9551. HEALTH SECURITY TRUST FUND.

    ``(a) Creation of Trust Fund.--
            ``(1) In general.--There is established in the Treasury of 
        the United States a trust fund to be known as the `Health 
        Security Trust Fund', consisting of such amounts as may be 
        appropriated or credited to it under this section or section 
        9602(b).
            ``(2) Accounts in the trust fund.--The Health Security 
        Trust Fund shall consist of--
                    ``(A) the Health Insurance Account,
                    ``(B) the Infrastructure Development Account,
                    ``(C) the State Health Quality and Consumer 
                Protection Account,
                    ``(D) the Long-Term Care Account, and
                    ``(E) the Federal Outlay Program Fraud and Abuse 
                Control Account.
        Each such account shall consist of such amounts as may be 
        allocated to it under this section.
    ``(b) Transfers to the Trust Fund.--
            ``(1) In general.--There are hereby appropriated to the 
        Health Security Trust Fund--
                    ``(A) amounts equivalent to the taxes received in 
                the Treasury under section 5701 (relating to taxes 
                imposed on tobacco products) to the extent such amounts 
                are attributable to the rates of tax in excess of such 
                rates of tax in effect on the day before the date of 
                the enactment of the Health Security Act,
                    ``(B) amounts equivalent to the taxes received in 
                the Treasury under section 4511 (relating to taxes on 
                high cost health plans),
                    ``(C) the amount determined by the Secretary, after 
                consultation with the Secretary of Health and Human 
                Services, to be equal to the sum of--
                            ``(i) the decrease in Federal expenditures 
                        under title XIX of the Social Security Act by 
                        reason of the provisions of, and the amendments 
                        made by, the Health Security Act, and
                            ``(ii) any reduction in payments to States 
                        under such title by reason of the State 
                        maintenance-of-effort requirement under section 
                        1931(d) of the Social Security Act,
                    ``(D) amounts determined by the Secretary, after 
                consultation with the Secretary of Health and Human 
                Services, to be equal to the decrease in Federal 
                expenditures (other than any decrease described in 
                paragraph (2)) attributable to the provisions of 
                subtitle G of title XXI of the Social Security Act 
                (relating to automobile insurance coordination), and
                    ``(E) amounts equivalent to the following amounts 
                received in the Treasury:
                            ``(i) Criminal fines imposed and collected, 
                        and amounts resulting from the forfeiture of 
                        property, in cases involving a Federal health 
                        care offense (as defined in section 1128D of 
                        the Social Security Act).
                            ``(ii) Penalties and damages imposed and 
                        collected under the False Claims Act (31 U.S.C. 
                        3729 et seq.), in cases involving claims 
                        related to the provision of health care items 
                        and services (other than funds awarded to a 
                        relator or for restitution).
                            ``(iii) Administrative penalties and 
                        assessments imposed and collected under section 
                        1128A of the Social Security Act (except as 
                        otherwise provided by law).
            ``(2) Transfers from other trust funds.--The Secretary of 
        Health and Human Services shall transfer each fiscal year to 
        the Health Security Trust Fund from the Federal Hospital 
        Insurance Trust Fund and the Federal Supplementary Medical 
        Insurance Trust Fund the amount which the Secretary estimates 
        is equal to the decrease in expenditures in each such trust 
        fund attributable to the provisions of subtitle G of title XXI 
        of the Social Security Act (relating to automobile insurance 
        coordination).
            ``(3) Transfers from certain recovered amounts and gifts.--
        The Secretary of Health and Human Services shall transfer each 
        fiscal year to the Health Security Trust Fund--
                    ``(A) the portion of amounts recovered under 
                section 1128A(a) of the Social Security Act with 
                respect to a certified health plan or certified long-
                term care policy which is not repaid to the plan or 
                policy, or
                    ``(B) any money gifts or bequests made to or on 
                behalf of the United States for allocation to the 
                account described in subsection (a)(2)(E).
    ``(c) Health Insurance Account.--
            ``(1) Transfers to the account.--There shall be allocated 
        to the Health Insurance Account all amounts received in the 
        Health Security Trust Fund which are not allocated to any other 
        account under this section.
            ``(2) Expenditures from account.--Amounts in the Health 
        Insurance Account are appropriated to the Secretary of Health 
        and Human Services to carry out the health insurance premium 
        assistance program and the cost-sharing grant program 
        established under part B of title XIX of the Social Security 
        Act, and to the extent any such amount is not expended during 
        any fiscal year, such amount shall be available for such 
        purpose for subsequent fiscal years.
    ``(d) Infrastructure Development Account.--
            ``(1) Transfers to the account.--
                    ``(A) In general.--There shall be allocated to the 
                Infrastructure Development Account from amounts 
                received in the Health Security Trust Fund each fiscal 
                year, $1,300,000,000.
                    ``(B) Adjustment.--In the case of any fiscal year 
                beginning after fiscal year 1999, the dollar amount 
                under subparagraph (A) in effect for the preceding 
                fiscal year (after application of this subparagraph) 
                shall be increased by an amount equal to the product 
                of--
                            ``(i) such dollar amount, and
                            ``(ii) the estimated percent change in the 
                        Consumer Price Index for all urban consumers 
                        (United States city average) during the 12-
                        month period ending at the midpoint of the 
                        fiscal year, with appropriate adjustments to 
                        reflect previous underestimations or 
                        overestimations under this subparagraph in the 
                        projected percentage change in such index.
            ``(2) Expenditures from account.--Amounts in the 
        Infrastructure Development Account are appropriated to carry 
        out the programs established under parts I and II of subtitle F 
        of title XXI of the Social Security Act, and to the extent any 
        such amount is not expended during any fiscal year, such amount 
        shall be available for such purpose for subsequent fiscal 
        years.
    ``(e) State Health Quality and Consumer Protection Account.--
            ``(1) Transfers to account.--There is allocated to the 
        State Health Quality and Consumer Protection Account from 
        amounts received in the Health Security Trust Fund each fiscal 
        year the amounts determined as follows:
                    ``(A) For fiscal year 1995, $200,000,000.
                    ``(B) For fiscal years 1996, 1997, and 1998, 
                $500,000,000.
                    ``(C) For fiscal years 1999 through 2004, 
                $450,000,000.
            ``(2) Expenditures from account.--Amounts in the State 
        Health Quality and Consumer Protection Account are appropriated 
        to carry out the programs established by sections 21003(c)(3), 
        21503, and 21816 of the Social Security Act, and to the extent 
        any such amount is not expended during any fiscal year, such 
        amount shall be available for such purpose for subsequent 
        fiscal years.
    ``(f) Long-Term Care Account.--
            ``(1) Transfers to account.--There is allocated to the 
        Long-Term Care Account each fiscal year amounts described in 
        subsections (b)(1)(D) and (2).
            ``(2) Expenditures from account.--Amounts in the Long-Term 
        Care Account are appropriated to carry out the program 
        established under part C of title XIX of the Social Security 
        Act, and to the extent any such amount is not expended during 
        any fiscal year, such amount shall be available for such 
        purpose for subsequent fiscal years.
    ``(g) Federal Outlay Program Fraud and Abuse Account.--
            ``(1) Transfers to account.--There is allocated to the 
        Federal Outlay Program Fraud and Abuse Account each fiscal year 
        an amount equal to the sum of $75,000,000, plus 50 percent of 
        the amounts transferred to the Trust Fund under subsection 
        (b)(1)(E), plus the amounts transferred to the Trust Fund under 
        subsection (b)(3)(B).
            ``(2) Expenditures from account.--
                    ``(A) In general.--Amounts in the Federal Outlay 
                Program Fraud and Abuse Account are appropriated to 
                carry out the program described in section 1128C of the 
                Social Security Act.
                    ``(B) Maintenance of effort.--No amounts in the 
                Federal Outlay Program Fraud and Abuse Account which 
                are made available to any Federal agency shall replace 
                or reduce the amount of appropriations otherwise made 
                available under appropriation Acts for such agency.
    ``(h) Allocation of Interest.--Amounts credited to the Health 
Security Trust Fund under section 9602(b) for any fiscal year shall be 
allocated to each account ratably on the basis of the amounts allocated 
to the account for the fiscal year (without regard to this subsection).

``SEC. 9552. GRADUATE MEDICAL EDUCATION AND ACADEMIC HEALTH CENTERS 
              TRUST FUND.

    ``(a) Creation of Trust Fund.--
            ``(1) In general.--There is established in the Treasury of 
        the United States a trust fund to be known as the `Graduate 
        Medical Education and Academic Health Centers Trust Fund', 
        consisting of such amounts as may be appropriated or credited 
        to the Academic Health Centers Trust Fund as provided in this 
        section or section 9602(b).
            ``(2) Accounts in the trust fund.--The Graduate Medical 
        Education and Academic Health Centers Trust Fund shall consist 
        of the following 2 accounts:
                    ``(A) The Graduate Medical and Nursing Education 
                Trust Fund.
                    ``(B) The Academic Health Centers Trust Fund.
        Each such account shall consist of such amounts as are 
        allocated to it under this section.
    ``(b) Transfers to the Trust Fund.--
            ``(1) Taxes.--There are hereby appropriated to the Graduate 
        Medical Education and Academic Health Centers Trust Fund 
        amounts received in the Treasury under sections 4501 and 4502 
        (relating to assessments on insured and self-insured health 
        plans), other than any portion of such amounts transferred to 
        the Biomedical and Behavioral Research Trust Fund under section 
        9553(b).
            ``(2) Transfers from other trust funds.--The Secretary of 
        Health and Human Services shall transfer each fiscal year to 
        the Graduate Medical Education and Academic Health Centers 
        Trust Fund from the Federal Hospital Insurance Trust Fund and 
        the Federal Supplementary Medical Insurance Trust Fund 
        established under the Social Security Act the sum of--
                    ``(A) the amount that would have been paid from the 
                Federal Hospital Insurance Trust Fund in such fiscal 
                year under section 1886(d)(5)(B) of such Act (as in 
                effect before the date of the enactment of the Health 
                Security Act), plus
                    ``(B) the amount that would have been paid from 
                such trust funds in such fiscal year under section 
                1886(h) of such Act (as so in effect).
    ``(c) Graduate Medical and Nursing Education Trust Fund.--
            ``(1) Transfers.--There is allocated to the Graduate 
        Medical and Nursing Education Trust Fund each fiscal year an 
        amount equal to the sum of--
                    ``(A) amounts described in subsection (b)(2)(B), 
                plus
                    ``(B) the excess of--
                            ``(i) the amounts made available under 
                        subpart I of part D of title XVIII of the 
                        Social Security Act, over
                            ``(ii) the amount described in subparagraph 
                        (A).
            ``(2) Expenditures.--Amounts in the Graduate Medical and 
        Nursing Education Trust Fund are appropriated to carry out the 
        programs established under subpart I of part D of title XVIII 
        of the Social Security Act, and to the extent any such amount 
        is not expended during any fiscal year, such amount shall be 
        available for such purpose for subsequent fiscal years.
    ``(d) Academic Health Centers Trust Fund.--
            ``(1) Transfers.--There is allocated to the Academic Health 
        Centers Trust Fund each fiscal year an amount equal to the sum 
        of--
                    ``(A) amounts described in subsection (b)(2)(A), 
                plus
                    ``(B) the excess of--
                            ``(i) the amounts made available under 
                        subpart II of part D of title XVIII of the 
                        Social Security Act, over
                            ``(ii) the amount described in subparagraph 
                        (A).
            ``(2) Expenditures.--Amounts in the Academic Health Centers 
        Trust Fund are appropriated to carry out the programs 
        established under subpart II of part D of title XVIII of the 
        Social Security Act, and to the extent any such amount is not 
        expended during any fiscal year, such amount shall be available 
        for such purpose for subsequent fiscal years.
    ``(e) Rules Relating To Accounts.--
            ``(1) Insufficient funds.--If, for any fiscal year, the sum 
        of the amounts required to be allocated under subsections (c) 
        and (d) exceeds the amounts received in the Graduate Medical 
        Education and Academic Health Centers Trust Fund, then each of 
        such amounts required to be so allocated shall be reduced to an 
        amount which bears the same ratio to such amount as the amounts 
        received in the trust fund bear to the amounts required to be 
        so allocated (without regard to this paragraph).
            ``(2) Allocation of excess funds and interest.--Amounts 
        received in the Graduate Medical Education and Academic Health 
        Centers Trust Fund in excess of the amounts required to be 
        allocated under subsections (c) and (d), and amounts credited 
        to such trust fund under section 9602(b), for any fiscal year 
        shall be allocated to each account ratably on the basis of the 
        amounts allocated to the account for the fiscal year (without 
        regard to this paragraph).

``SEC. 9553. BIOMEDICAL AND BEHAVIORAL RESEARCH TRUST FUND.

    ``(a) Creation of Trust Fund.--There is established in the Treasury 
of the United States a trust fund to be known as the `Biomedical and 
Behavioral Research Trust Fund', consisting of such amounts as may be 
appropriated or credited to the Biomedical and Behavioral Research 
Trust Fund as provided in this section or section 9602(b).
    ``(b) Transfers to the Trust Fund.--There are hereby appropriated 
to the Biomedical and Behavioral Research Trust Fund amounts equivalent 
to 14.3 percent of amounts received in the Treasury under sections 4501 
and 4502 (relating to assessments on insured and self-insured health 
plans).
    ``(c) Expenditures From the Trust Fund.--
            ``(1) In general.--The Secretary shall pay annually, within 
        30 days after the President signs an appropriations Act for the 
        Departments of Labor, Health and Human Services, and Education 
        and related agencies, or by the end of the first quarter, to 
        the Secretary of Health and Human Services, an amount equal to 
        the amount in the Biomedical and Behavioral Research Trust Fund 
        at the time of such payment.
            ``(2) Distribution of amounts.--The Secretary of Health and 
        Human Services shall distribute--
                    ``(A) 3 percent of the amounts received under 
                paragraph (1) during any fiscal year to the Office of 
                the Director of the National Institutes of Health and 
                for construction of intramural and extramural buildings 
                and facilities under section 1502 of the National 
                Institutes of Health Revitalization Act of 1993,
                    ``(B) 20 percent of the amounts received under 
                paragraph (1) during any fiscal year to the Agency for 
                Health Care Policy and Research for health care 
                services research under section 21502 of the Social 
                Security Act, and
                    ``(C) the remainder of the amounts received under 
                paragraph (1) during any fiscal year to member 
                institutes of the National Institutes of Health in the 
                same proportion to the total amount received under such 
                paragraph, as the amount of annual appropriations under 
                appropriations Acts for each member institute for the 
                fiscal year bears to the total amount of appropriations 
                under appropriations Acts for all member institutes of 
                the National Institutes of Health for the fiscal year.
            ``(3) Maintenance of effort.--No amounts in the Biomedical 
        and Behavioral Research Trust Fund shall replace or reduce the 
        amount of appropriations for the National Institutes of Health 
        under appropriations Acts.''
    (b) Conforming Amendment.--Subchapter A of chapter 98 is amended by 
inserting after the subchapter heading the following new items:

                              ``Part I.  General trust funds.
                              ``Part II. Health care trust funds.

                    ``PART I--GENERAL TRUST FUNDS''.

                  Subtitle G--Other Revenue Provisions

                  PART I--EMPLOYMENT STATUS PROVISIONS

SEC. 771. EMPLOYMENT STATUS PROPOSAL REQUIRED FROM DEPARTMENT OF THE 
              TREASURY.

    Not later than January 1, 1996, the Secretary of the Treasury shall 
submit to the Committee on Ways and Means of the House of 
Representatives and the Committee on Finance of the Senate a 
legislative proposal providing statutory standards for the 
classification of workers as employees or independent contractors.

SEC. 772. INCREASE IN SERVICES REPORTING PENALTIES.

    (a) Increase in Penalty.--Section 6721(a) (relating to imposition 
of penalty) is amended by adding at the end the following new 
paragraph:
            ``(3) Increased penalty for returns involving payments for 
        services.--
                    ``(A) In general.--Subject to the overall 
                limitation of paragraph (1), the amount of the penalty 
                under paragraph (1) for any failure with respect to any 
                applicable return shall be equal to the greater of $50 
                or 5 percent of the amount required to be reported 
                correctly but not so reported.
                    ``(B) Exception where substantial compliance.--
                Subparagraph (A) shall not apply to failures with 
                respect to applicable returns required to be filed by a 
                person during any calendar year if the aggregate amount 
                which is timely and correctly reported on applicable 
                returns filed by the person for the calendar year is at 
                least 97 percent of the aggregate amount which is 
                required to be reported on applicable returns by the 
                person for the calendar year.
                    ``(C) Applicable return.--For purposes of this 
                paragraph, the term `applicable return' means any 
                information return required to be filed under--
                            ``(i) section 6041(a) but only if such 
                        return relates to payments to any person for 
                        services performed by such person (other than 
                        as an employee), or
                            ``(ii) section 6041A(a).''
    (b) Conforming Amendment.--Section 6721(a)(1) is amended by 
striking ``In'' and inserting ``Except as provided in paragraph (3), 
in''.
    (c) Effective Date.--The amendments made by this section shall 
apply to returns the due date for which (without regard to extensions) 
is more than 30 days after the date of the enactment of this Act.

         PART II--TAX INCENTIVES FOR HEALTH SERVICES PROVIDERS

SEC. 775. NONREFUNDABLE CREDIT FOR CERTAIN PRIMARY HEALTH SERVICES 
              PROVIDERS.

    (a) In General.--Subpart A of part IV of subchapter A of chapter 1 
(relating to nonrefundable personal credits) is amended by inserting 
after section 22 the following new section:

``SEC. 23. PRIMARY HEALTH SERVICES PROVIDERS.

    ``(a) Allowance of Credit.--There shall be allowed as a credit 
against the tax imposed by this chapter for the taxable year an amount 
equal to the product of--
            ``(1) the number of months during such taxable year--
                    ``(A) during which the taxpayer is a qualified 
                primary health services provider, and
                    ``(B) which are within the taxpayer's eligible 
                service period, and
            ``(2) $1,000 ($500 in the case of a qualified practitioner 
        who is not a physician).
    ``(b) Qualified Primary Health Services Provider.--For purposes of 
this section--
            ``(1) In general.--The term `qualified primary health 
        services provider' means, with respect to any month, any 
        qualified practitioner who--
                    ``(A) has in effect a certification by the Bureau 
                as a provider of primary health services and such 
                certification is, when issued, for a health 
                professional shortage area in which the qualified 
                practitioner is providing primary health services,
                    ``(B) is providing primary health services full 
                time in the health professional shortage area 
                identified in such certification, and
                    ``(C) has not received a scholarship under the 
                National Health Service Corps Scholarship Program or 
                any loan repayments under the National Health Service 
                Corps Loan Repayment Program.
            ``(2) Special rules relating to shortage areas.--
                    ``(A) Areas ceasing to be shortage areas.--For 
                purposes of paragraph (1)(B) and subsection (e)(2), a 
                provider shall be treated as providing services in a 
                health professional shortage area when such area ceases 
                to be such an area if it was such an area on the first 
                day of the provider's eligible service period.
                    ``(B) Areas within metropolitan areas.--A qualified 
                practitioner who is providing services within a 
                metropolitan statistical area (as defined in section 
                143(k)(2)) shall not be treated as meeting the 
                requirements of paragraph (1)(B) unless such services 
                are provided for, or on behalf of, a governmental or 
                nonprofit entity.
            ``(3) Qualified practitioner.--The term `qualified 
        practitioner' means a physician, a physician assistant, a nurse 
        practitioner, or a certified nurse-midwife.
    ``(c) Eligible Service Period.--For purposes of this section, the 
term `eligible service period' means the period of 36 consecutive 
calendar months beginning with the first month the taxpayer is a 
qualified primary health services provider (as specified in the 
certification under subsection (b)(1)(A)). A taxpayer shall not have 
more than 1 eligible service period.
    ``(d) Other Definitions and Special Rules.--For purposes of this 
section--
            ``(1) Bureau.--The term `Bureau' means the Bureau of 
        Primary Health Care, Health Resources and Services 
        Administration of the United States Public Health Service.
            ``(2) Physician.--The term `physician' has the meaning 
        given to such term by section 1861(r) of the Social Security 
        Act.
            ``(3) 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.
            ``(4) Certified nurse-midwife.--The term `certified nurse-
        midwife' has the meaning given to such term by section 
        1861(gg)(2) of the Social Security Act.
            ``(5) Primary health services.--The term `primary health 
        services' has the meaning given such term by section 330(b)(1) 
        of the Public Health Service Act.
            ``(6) Health professional shortage area.--The term `health 
        professional shortage area' has the meaning given such term by 
        section 332(a)(1)(A) of the Public Health Service Act.
            ``(7) Practitioner currently practicing in shortage 
        areas.--In the case of a qualified practitioner who, on 
        December 31, 1994, was providing primary health services in any 
        health professional shortage area--
                    ``(A) the practitioner's eligible service period 
                shall begin on January 1, 1995, and
                    ``(B) if such practitioner is a physician, 
                subsection (a)(2) shall be applied by substituting 
                `$500' for `$1,000'.
    ``(e) Recapture of Credit.--
            ``(1) In general.--If there is a recapture event during any 
        taxable year, then--
                    ``(A) no credit shall be allowed under subsection 
                (a) for such taxable year and any succeeding taxable 
                year, and
                    ``(B) the tax of the taxpayer under this chapter 
                for such taxable year shall be increased by an amount 
                equal to the aggregate credits allowed to such taxpayer 
                under this section for all prior taxable years.
            ``(2) 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 during any of the first 24 months during the 
                taxpayer's eligible service period.
                    ``(B) Secretarial waiver.--The Secretary, in 
                consultation with the Secretary of Health and Human 
                Services, may waive any recapture event caused by 
                extraordinary circumstances.
            ``(3) No credits against tax; minimum tax.--Any increase in 
        tax under this subsection shall not be treated as a tax imposed 
        by this chapter for purposes of determining the amount of any 
        credit under subpart A, B, or D of this part or for purposes of 
        section 55.''
    (b) Clerical Amendment.--The table of sections for subpart A of 
part IV of subchapter A of chapter 1 is amended by inserting after the 
item relating to section 22 the following new item:

                              ``Sec. 23. Primary health services 
                                        providers.''
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1994.

SEC. 776. EXPENSING OF MEDICAL EQUIPMENT.

    (a) In General.--Paragraph (1) of section 179(b) (relating to 
dollar limitation on expensing of certain depreciable business assets) 
is amended to read as follows:
            ``(1) Dollar limitation.--
                    ``(A) General rule.--The aggregate cost which may 
                be taken into account under subsection (a) for any 
                taxable year shall not exceed $17,500.
                    ``(B) Health care property.--The aggregate cost 
                which may be taken into account under subsection (a) 
                shall be increased by the lesser of--
                            ``(i) the cost of section 179 property 
                        which is health care property placed in service 
                        during the taxable year, or
                            ``(ii) $15,000.''
    (b)  Definition.--Section 179(d) (relating to definitions) is 
amended by adding at the end the following new paragraph:
            ``(11) Health care property.--
                    ``(A) In general.--For purposes of this section, 
                the term `health care property' means section 179 
                property--
                            ``(i) which is medical equipment used in 
                        the screening, monitoring, observation, 
                        diagnosis, or treatment of patients in a 
                        laboratory, medical, or hospital environment,
                            ``(ii) which is owned (directly or 
                        indirectly) and used by 1 or more physicians 
                        (as defined in section 1861(r) of the Social 
                        Security Act) in the active conduct of the 
                        full-time trade or business of all such 
                        physicians of providing primary health services 
                        (as defined in section 330(b)(1) of the Public 
                        Health Service Act) in a health professional 
                        shortage area (as defined in section 
                        332(a)(1)(A) of the Public Health Service Act), 
                        and
                            ``(iii) substantially all the use of which 
                        is in such area.
                    ``(B) Special rule for metropolitan statistical 
                areas.--A physician who is providing services within a 
                metropolitan statistical area (as defined in section 
                143(k)(2)) shall not be treated as meeting the 
                requirements of subparagraph (A)(ii) unless such 
                services are provided for, or on behalf of, a 
                governmental or nonprofit entity.''
    (c) Recapture.--Paragraph (10) of section 179(d) is amended by 
inserting ``and with respect to any health care property which ceases 
(other than by an area failing to be treated as a health professional 
shortage area) to be health care property at any time'' before the 
period.
    (d) Effective Date.--The amendments made by this section shall 
apply to property placed in service in taxable years beginning after 
December 31, 1994.

                   PART III--MISCELLANEOUS PROVISIONS

SEC. 781. POST-RETIREMENT MEDICAL AND LIFE INSURANCE RESERVES.

    (a) Minimum Period for Working Lives.--Section 419A(c)(2) (relating 
to additional reserves for post-retirement medical and life insurance 
benefits) is amended by inserting ``(but not less than 10 years)'' 
after ``working lives of the covered employees''.
    (b) Separate Accounting.--
            (1) Requirement.--Section 419A(c)(2) is amended by adding 
        at the end the following new flush sentence:
``Such reserve shall be maintained as a separate account.''
            (2) Use of reserve for other purposes.--Paragraph (1) of 
        section 4976(b) (defining disqualified benefit) is amended by 
        striking ``and'' at the end of subparagraph (B), by striking 
        the period at the end of subparagraph (C) and inserting ``, 
        and'', and by adding after subparagraph (C) the following new 
        subparagraph:
                    ``(D) any payment to which subparagraph (C) does 
                not apply which is out of an account described in 
                section 419A(c)(2) and which is not used to provide a 
                post-retirement medical benefit or life insurance 
                benefit.''
    (c) Effective Dates.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to contributions 
        paid or accrued after December 31, 1994, in taxable years 
        ending after such date.
            (2) Separate accounting.--The amendments made by subsection 
        (b) shall apply to contributions paid or accrued after the date 
        of the enactment of this Act, in taxable years ending after 
        such date.

SEC. 782. COORDINATION WITH HEALTH CARE CONTINUATION PROVISIONS.

    (a) Amendments to Internal Revenue Code.--
            (1) In general.--Clause (i) of section 4980B(f)(2)(B) 
        (defining period of coverage) is amended to read as follows:
                            ``(i) Maximum period.--The later of--
                                    ``(I) the date which is 6 months 
                                after the date of the qualifying event, 
                                or
                                    ``(II) the last day of the calendar 
                                year in which the qualifying event 
                                occurs.''
            (2) Conforming amendments.--Section 4980B(f)(2) is 
        amended--
                    (A) by striking clause (v) of subparagraph (B),
                    (B) by striking the last sentence of subparagraph 
                (C), and
                    (C) by striking subparagraph (E).
    (b) Amendments to ERISA.--
            (1) In general.--Section 602(2)(A) of the Employee 
        Retirement Income Security Act of 1974 (29 U.S.C. 1162(2)(A)) 
        is amended to read as follows:
                    ``(A) Maximum required period.--The later of--
                            ``(i) the date which is 6 months after the 
                        date of the qualifying event, or
                            ``(ii) the last day of the calendar year in 
                        which the qualifying event occurs.''
            (2) Conforming amendments.--Section 602 of such Act (29 
        U.S.C. 1162) is amended--
                    (A) by striking subparagraph (E) of paragraph (2),
                    (B) by striking the last sentence of paragraph (3), 
                and
                    (C) by striking paragraph (5).
    (c) Amendments to PHSA.--
            (1) In general.--Section 2202(2)(A) of the Public Health 
        Service Act (42 U.S.C. 300bb-2(2)(A)) is amended to read as 
        follows:
                    ``(A) Maximum required period.--The later of--
                            ``(i) the date which is 6 months after the 
                        date of the qualifying event, or
                            ``(ii) the last day of the calendar year in 
                        which the qualifying event occurs.''
            (2) Conforming amendments.--Section 2202 of such Act (42 
        U.S.C. 300bb-2) is amended--
                    (A) by striking subparagraph (E) of paragraph (2),
                    (B) by striking the last sentence of paragraph (3), 
                and
                    (C) by striking paragraph (5).
    (d) Effective Date.--The amendments made by this section apply to 
qualifying events occurring after December 31, 1996.

SEC. 783. CREDIT FOR COST OF PERSONAL ASSISTANCE SERVICES REQUIRED BY 
              EMPLOYED INDIVIDUALS.

    (a) In General.--Subpart A of part IV of subchapter A of chapter 1 
(relating to nonrefundable personal credits), as amended by section 
775, is amended by inserting after section 23 the following new 
section:

``SEC. 24. COST OF PERSONAL ASSISTANCE SERVICES REQUIRED BY EMPLOYED 
              INDIVIDUALS.

    ``(a) Allowance of Credit.--
            ``(1) In general.--In the case of an eligible individual, 
        there shall be allowed as a credit against the tax imposed by 
        this chapter for the taxable year an amount equal to the 
        applicable percentage of the personal assistance expenses paid 
        or incurred by the taxpayer during such taxable year.
            ``(2) Applicable percentage.--For purposes of paragraph 
        (1), the term `applicable percentage' means 50 percent reduced 
        (but not below zero) by 10 percentage points for each $5,000 by 
        which the modified adjusted gross income (as defined in section 
        59B(d)(2)) of the taxpayer for the taxable year exceeds 
        $45,000. In the case of a married individual filing a separate 
        return, the preceding sentence shall be applied by substituting 
        `$2,500' for `$5,000' and `$22,500' for `$45,000'.
    ``(b) Limitation.--The amount of personal assistance expenses for 
the benefit of an individual which may be taken into account under 
subsection (a) for the taxable year shall not exceed the lesser of--
            ``(1) $15,000, or
            ``(2) such individual's earned income (as defined in 
        section 32(c)(2)) for the taxable year.
In the case of a joint return, the amount under the preceding sentence 
shall be determined separately for each spouse.
    ``(c) Eligible Individual.--For purposes of this section, the term 
`eligible individual' means any individual (other than a nonresident 
alien) who, by reason of any medically determinable physical impairment 
which can be expected to result in death or which has lasted or can be 
expected to last for a continuous period of not less than 12 months, is 
unable to engage in any substantial gainful activity without personal 
assistance services appropriate to carry out activities of daily 
living. An individual shall not be treated as an eligible individual 
unless such individual furnishes such proof thereof (in such form and 
manner, and at such times) as the Secretary may require.
    ``(d) Other Definitions.--For purposes of this section--
            ``(1) Personal assistance expenses.--The term `personal 
        assistance expenses' means expenses for--
                    ``(A) personal assistance services appropriate to 
                carry out activities of daily living in or outside the 
                home,
                    ``(B) homemaker/chore services incidental to the 
                provision of such personal assistance services,
                    ``(C) in the case of an individual with a cognitive 
                impairment, assistance with life skills,
                    ``(D) communication services,
                    ``(E) work-related support services,
                    ``(F) coordination of services described in this 
                paragraph,
                    ``(G) assistive technology and devices, including 
                assessment of the need for particular technology and 
                devices and training of family members, and
                    ``(H) modifications to the principal place of abode 
                of the individual to the extent the expenses for such 
                modifications would (but for subsection (e)(2)) be 
                expenses for medical care (as defined by section 213) 
                of such individual.
            ``(2) Activities of daily living.--The term `activities of 
        daily living' means eating, toileting, transferring, bathing, 
        and dressing.
    ``(e) Special Rules.--
            ``(1) Payments to related persons.--No credit shall be 
        allowed under this section for any amount paid by the taxpayer 
        to any person who is related (within the meaning of section 267 
        or 707(b)) to the taxpayer.
            ``(2) Coordination with medical expense deduction.--Any 
        amount taken into account in determining the credit under this 
        section shall not be taken into account in determining the 
        amount of the deduction under section 213.
            ``(3) Basis reduction.--For purposes of this subtitle, if a 
        credit is allowed under this section for any expense with 
        respect to any property, the increase in the basis of such 
        property which would (but for this paragraph) result from such 
        expense shall be reduced by the amount of the credit so 
        allowed.
    ``(f) Cost-of-Living Adjustment.--In the case of any taxable year 
beginning after 1996, the $45,000 and $22,500 amounts in subsection 
(a)(2) and the $15,000 amount in subsection (b) shall be increased by 
an amount equal to--
            ``(1) such dollar amount, multiplied by
            ``(2) the cost-of-living adjustment determined under 
        section 1(f)(3) for the calendar year in which the taxable year 
        begins by substituting `calendar year 1995' for `calendar year 
        1992' in subparagraph (B) thereof.
If any increase determined under the preceding sentence is not a 
multiple of $1,000, such increase shall be rounded to the nearest 
multiple of $1,000.''
    (b) Technical Amendment.--Subsection (a) of section 1016 is amended 
by striking ``and'' at the end of paragraph (24), by striking the 
period at the end of paragraph (25) and inserting ``, and'', and by 
adding at the end thereof the following new paragraph:
            ``(26) in the case of any property with respect to which a 
        credit has been allowed under section 24, to the extent 
        provided in section 24(e)(3).''
    (c) Clerical Amendment.--The table of sections for subpart A of 
part IV of subchapter A of chapter 1 is amended by inserting after the 
item relating to section 23 the following new item:

                              ``Sec. 24. Cost of personal assistance 
                                        services required by employed 
                                        individuals.''
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1995.

SEC. 784. DISCLOSURE OF RETURN INFORMATION FOR ADMINISTRATION OF 
              CERTAIN PROGRAMS UNDER THE HEALTH SECURITY ACT.

    (a) In General.--Section 6103(l) (relating to disclosure of returns 
and return information for purposes other than tax administration) is 
amended by adding at the end the following new paragraph:
            ``(15) Disclosure of return information for purposes of 
        health security act.--
                    ``(A) In general.--The Secretary shall, upon 
                written request, disclose current return information 
                described in subparagraph (B) to any Federal, State, or 
                local agency administering an assistance program under 
                the Health Security Act.
                    ``(B) Information.--The information described in 
                this subparagraph is information which consists only of 
                adjusted gross income, the untaxed portion of social 
                security benefits, tax-exempt interest income, marital 
                status, and dependents.
                    ``(C) Restriction on disclosure.--The Secretary 
                shall disclose return information under subparagraph 
                (A) only for purposes of, and to the extent necessary 
                in, determining eligibility for, or the correct amount 
                of, assistance provided under the Health Security Act.
                    ``(D) Exclusion from matching program.--Any matches 
                of information under this paragraph shall not be 
                treated as a matching program for purposes of section 
                552a of title 5, United States Code.''
    (b) Conforming Amendments.--
            (1) Section 6103(a)(2) is amended by inserting ``or (15)'' 
        after ``subsection (l)(7)(D)''.
            (2) Section 6103(p)(3)(A) is amended by striking ``or 
        (14)'' and inserting ``(14), or (15)''.
            (3) Section 6103(p)(4) is amended--
                    (A) by striking ``or (12)'' in the matter preceding 
                subparagraph (A) and inserting ``(12), or (15)'', and
                    (B) by striking ``or (14)'' in subparagraph (F)(ii) 
                and inserting ``(14), or (15)''.
            (4) Section 7213(a)(2) is amended by striking ``or (12)'' 
        and inserting ``(12), or (15)''.

SEC. 785. SPECIAL RULE FOR DEFERRED COMPENSATION PLANS OF GROUP MEDICAL 
              PRACTICES.

    (a) In General.--Section 457(e) is amended by adding at the end the 
following new paragraph:
            ``(14) Treatment of excess benefit arrangements of certain 
        group medical practices.--
                    ``(A) In general.--In the case of an individual 
                who--
                            ``(i) is a member of a group medical 
                        practice which is exempt from taxation under 
                        section 501(a) and which is described in 
                        section 501(c)(3), and
                            ``(ii) is a participant in an eligible 
                        deferred compensation plan maintained by such 
                        practice which is an excess benefit plan,
        subsections (b)(2) and (c)(1) shall not apply in determining 
        the maximum amount which may be deferred under such plan for a 
        taxable year.
                    ``(B) Excess benefit plan.--For purposes of 
                subparagraph (A), the term `excess benefit plan' means 
                a plan (or separable part thereof) which is maintained 
                by an employer solely for purposes of providing 
                benefits for certain employees in excess of the 
                limitations on contributions and benefits imposed by 
                section 415.''
    (b) Effective Date.--The amendments made by this section apply to 
taxable years beginning after December 31, 1994.

               Subtitle H--Ensuring Health Care Financing

SEC. 791. ENSURING HEALTH CARE FINANCING.

    (a) Purpose.--
            (1) In general.--The purpose of this section is to ensure 
        that programs established under this Act, and unanticipated 
        increases in other Federal health spending, do not increase the 
        Federal deficit.
            (2) Definition.--For purposes of this subsection, the term 
        ``other Federal health spending'' includes medicare 
        expenditures, medicaid expenditures, and the revenue losses 
        associated with the employee exclusion of employer-provided 
        accident and health coverage and the deductibility of 
        individual medical expenses in excess of 7.5 percent of 
        adjusted gross income.
    (b) Legal Entitlements Contingent.--Any entitlement provided by 
this Act to premium and cost-sharing assistance, or to tax deductions 
for health insurance premiums provided by section 731 of this Act, 
shall be subject to the operation of this section.
    (c) Determination of Unfinanced Health Spending.--
            (1) Current health spending estimate.--
                    (A) Fiscal years through 2004.--Not later than the 
                date that is 60 days after the date of enactment of 
                this Act, the President shall issue an executive order 
                setting forth the current health spending estimate for 
                fiscal year 1995 and for each subsequent fiscal year 
                through 2004, which shall consist of estimates (for 
                each year) projecting what Federal outlays or revenues 
                would have been if this Act had not been enacted, for 
                the following:
                            (i) total outlays under the Medicare and 
                        Medicaid programs (including administrative 
                        costs and offsetting receipts); and
                            (ii) revenue losses associated with--
                                    (I) the employee exclusion of 
                                employer-provided accident and health 
                                coverage; and
                                    (II) the deductibility of 
                                individual medical expenses in excess 
                                of 7.5 percent of adjusted gross 
                                income.
                    (B) Fiscal years after 2004.--For each fiscal year 
                following fiscal year 2004, the current health spending 
                estimate is the estimate set forth in the executive 
                order for fiscal year 2004, modified by an annual 
                adjustment factor set forth in such order.
            (2) President's budget to include health reform 
        estimates.--
                    (A) Estimates for upcoming fiscal year and current 
                year.--When the President submits the budget for fiscal 
                year 1996 (as required by section 1105 of title 31), 
                and for each fiscal year thereafter, the President 
                shall include a health reform estimate (as specified in 
                paragraph (3)) with respect to the upcoming fiscal year 
                and the current fiscal year.
                    (B) Determinations for prior fiscal year.--When the 
                President submits the budget for fiscal year 1997 (as 
                required by section 1105 of title 31), and for each 
                fiscal year thereafter, the President shall include 
                determinations for the fiscal year which ended the 
                prior September, with respect to the items specified in 
                the health reform estimate (as specified in paragraph 
                (3)).
            (3) Health reform estimate.--
                    (A) In general.--The health reform estimate is a 
                calculation, for the applicable fiscal year, of--
                            (i) updated projections for the applicable 
                        fiscal year for each item set forth in the 
                        current health estimate (as set forth in 
                        paragraph (1)); plus
                            (ii) the health reform outlays set forth in 
                        subparagraph (B); minus
                            (iii) the net health reform revenues set 
                        forth in subparagraph (C).
                    (B) Health reform outlays.--Health reform outlays 
                equal--
                            (i) total outlays for premium and cost 
                        sharing assistance (including administrative 
                        costs) projected for the fiscal year; plus
                            (ii) other changes in outlays resulting 
                        from this Act, including discretionary 
                        appropriations enacted pursuant to this Act.
                    (C) Net health reform revenues.-- Net health reform 
                revenues equal--
                            (i) total new revenues projected for the 
                        applicable fiscal year due to the increase in 
                        the tobacco excise tax and the tax on high cost 
                        health plans provided in this Act; minus
                            (ii) total revenue losses projected for the 
                        applicable fiscal year due to the deduction for 
                        purchase by individuals and the self-employed 
                        of health insurance policies provided by 
                        section 731 of this Act; plus or minus
                            (iii) other changes in revenues resulting 
                        from this Act (which are not reflected in the 
                        updated current health estimate as set forth in 
                        subparagraph (A)(i)).
            (4) Determination of unfinanced health spending and excess 
        health financing.--Each health reform estimate required by this 
        subsection shall be accompanied by a comparison of such 
        estimate with the current health spending estimate for the 
        applicable fiscal year. If the applicable health reform 
        estimate exceeds the applicable current health spending 
        estimate, the President shall report the amount of the excess 
        as unfinanced health spending for the applicable fiscal year. 
        If the applicable health reform estimate is less than the 
        applicable current health spending estimate, the President 
        shall report such difference as excess health financing for the 
        applicable fiscal year.
    (d) Offsetting Unfinanced Health Spending.--
            (1) Requirement to fully offset unfinanced health 
        spending.--If the President's budget includes a determination 
        of unfinanced health spending pursuant to subsection (c)(4) for 
        the upcoming fiscal year, the current fiscal year, or the 
        fiscal year which ended the prior October, such determination 
        shall be accompanied by an executive order effective on October 
        1 of that calendar year which fully offsets in the fiscal year 
        beginning October 1 the sum of such unfinanced health spending 
        (for the upcoming fiscal year, the current fiscal year, and the 
        prior fiscal year) in the manner provided in this subsection. 
        Such executive order shall be accompanied by such regulations 
        as are required under subsection (d)(4).
            (2) Offsets.--The offsets required by this subsection shall 
        be accomplished through a combination of--
                    (A) subject to the provisions of paragraph (3)--
                            (i) in the case of the premium assistance 
                        program, reducing the percentages otherwise in 
                        effect for the fiscal year under clauses (i) 
                        and (ii) of section 1952 (a)(2)(A) of the 
                        Social Security Act, and
                            (ii) in the case of the cost-sharing 
                        assistance program, reducing payments to the 
                        States under section 1957 of such Act;
                    (B) reducing the percentage specified in section 
                213(f)(1) of the Internal Revenue Code of 1986; and
                    (C) increasing out-of-pocket limits in the standard 
                and alternative benefits packages as imposed by the 
                National Health Benefits Board pursuant to this Act, to 
                the extent such actions will produce measurable Federal 
                outlay savings.
            (3) Eligibility percentage for pregnant women and children 
        reduced last.--Any reduction under paragraph (2)(A)--
                    (A) shall be made first by reducing the percentages 
                under sections 1952(a)(2)(A)(i) of the Social Security 
                Act and by reducing the payments to States under 1957 
                of such Act; and
                    (B) to the extent sufficient offsets may not be 
                made under subparagraph (A), shall then be made by 
                reducing the percentage under section 1952(a)(2)(A)(ii) 
                of such Act.
            (4) Proportionality.--The President shall apply the offset 
        mechanisms provided in paragraph (2) (A), (B), and (C) 
        proportionally, to the extent possible, but in no case shall 
        the total amount of offsets be less than the amount required by 
        subsection (d)(1).
            (5) Consultation.--In making the determinations required by 
        this subsection, the President shall consult with the Director 
        of the Office of Management and Budget, the Secretary of the 
        Treasury, and the National Health Benefits Board. Any order 
        modifying the new tax deductions shall be accompanied by 
        Treasury regulations implementing such modification. Any order 
        modifying out-of-pocket limits shall be accompanied by National 
        Health Benefits Board regulations implementing such 
        modification.
    (e) Carryover of Excess Health Financing.--If the President's 
budget includes a determination of excess health financing pursuant to 
subsection (c)(4) for a fiscal year, such amount shall be included in 
calculating the health reform estimate for the subsequent fiscal year, 
by including such amount in the calculation of total net revenues 
projected for that year under subsection (c)(3)(C)(iii).
    (f) Recommendations for Alternative Reductions.--If the President's 
budget for a fiscal year is accompanied by an executive order under 
subsection (d)(1), the National Health Care Commission shall, within a 
reasonable time, transmit to the Speaker of the House of 
Representatives and the President of the Senate a report including 
alternative proposals to offset the projected excess outlays.
    (g) GAO Audit of Reductions.--If the President has issued an 
executive order under subsection (d)(1), the General Accounting Office 
shall report to Congress, as soon thereafter as possible following the 
date of transmittal of the President's budget, an analysis of whether 
the executive order has fully complied with the requirements of this 
section.