[Congressional Bills 104th Congress]
[From the U.S. Government Publishing Office]
[H.R. 2071 Introduced in House (IH)]







104th CONGRESS
  1st Session
                                H. R. 2071

         To promote cost containment and reform in health care.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             July 19, 1995

   Mr. Peterson of Florida (for himself, Mr. Moran, Mr. Dooley, Mr. 
  Clement, Mr. Poshard, Mr. Stenholm, Mr. Martinez, Mr. Gibbons, Mrs. 
Meek of Florida, and Mr. Coleman) introduced the following bill; which 
   was referred to the Committee on Commerce, and in addition to the 
 Committees on Ways and Means, Economic and Educational Opportunities, 
 and the Judiciary, for a period to be subsequently determined by the 
  Speaker, in each case for consideration of such provisions as fall 
           within the jurisdiction of the committee concerned

_______________________________________________________________________

                                 A BILL


 
         To promote cost containment and reform in health care.
    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Health Care 
Improvement Act of 1995''.
    (b) Table of Contents.--The table of contents of this Act is as 
follows:

Sec. 1. Short title; table of contents.
    TITLE I--ASSURING AVAILABILITY AND CONTINUITY OF HEALTH COVERAGE

                      Subtitle A--Insurance Reform

              Part 1--Guaranteed Access to Health Coverage

Sec. 1001. Guaranteed offer by carriers.
Sec. 1002. Guaranteed issue by carriers.
Sec. 1003. Guaranteed renewal.
Sec. 1004. Restricting preexisting condition exclusions.
Sec. 1005. Enrollment periods.
                     Part 2--Provision of Benefits

Sec. 1011. Standards for managed care arrangements.
Sec. 1012. Utilization review.
Sec. 1013. Medical savings accounts.
                     Part 3--Fair Rating Practices

Sec. 1021. Use of fair rating practices.
Sec. 1022. Coordination with premium assistance certificate program.
Sec. 1023. Establishment of risk adjustment mechanisms.
                      Part 4--Consumer Protections

Sec. 1031. Requirement for provision of information.
Sec. 1032. Prohibition of improper incentives.
Sec. 1033. Written policies and procedures respecting advance 
                            directives.
                          Subtitle B--Benefits

Sec. 1101. Qualified health coverage.
Sec. 1102. Standard coverage.
Sec. 1103. High-deductible coverage.
Sec. 1104. Actuarial valuation of benefits.
Sec. 1105. Limitation on offering supplemental benefits.
Sec. 1106. Family coverage option; supplemental coverage.
Sec. 1107. Level playing field for providers.
   Subtitle C--Standards and Certification; Enforcement; Preemption; 
                           General Provisions

Sec. 1201. Establishment of standards.
Sec. 1202. Application of standards to carriers through States.
Sec. 1203. Application to group health plans.
Sec. 1204. Enforcement.
Sec. 1205. Limitation on self insurance for small employers.
              Subtitle D--Definitions; General Provisions

Sec. 1901. General definitions.
Sec. 1902. Definitions relating to employment.
Sec. 1903. Definitions relating to health coverage, plans, and 
                            carriers.
Sec. 1904. Definitions relating to residence and immigration status.
Sec. 1905. Effective dates.
           TITLE II--REMOVAL OF FINANCIAL BARRIERS TO ACCESS

    Subtitle A--Tax Deductibility for Individuals and Self-Employed

Sec. 2001. Deduction for health insurance costs of self-employed 
                            individuals increased and made permanent.
Sec. 2002. Deduction for health insurance costs of individuals who are 
                            not self-employed.
Sec. 2003. Restrictions on health benefits provided through cafeteria 
                            plans and flexible spending arrangements.
 Subtitle B--Premium and Cost-Sharing Subsidy Program and Supplemental 
              Benefits Program for Low-Income Individuals

Sec. 2101. State premium and cost-sharing subsidy programs and 
                            supplemental benefits programs.
    ``TITLE XXI--STATE ACUTE CARE BENEFITS PROGRAMS FOR LOW-INCOME 
                              INDIVIDUALS

       ``Part A--State Premium and Cost-Sharing Subsidy Programs

        ``Sec. 2101. Establishment of State programs.
        ``Sec. 2102. Eligibility.
        ``Sec. 2103. Premium and cost-sharing assistance.
        ``Sec. 2104. Eligibility determinations.
        ``Sec. 2105. End-of-year reconciliation for premium assistance.
        ``Sec. 2106. Payments to States.
        ``Sec. 2107. Federal title XXI matching percentage.
       ``Part B--State Supplemental Acute Care Benefits Programs

        ``Sec. 2121. Establishment of State supplemental acute care 
                            benefits programs.
        ``Sec. 2122. Eligibility.
        ``Sec. 2123. Scope and provision of benefits; benefits 
                            administration.
        ``Sec. 2124. Payments to States.
                      ``Part C--General Provisions

        ``Sec. 2141. Nature of payment obligation.
        ``Sec. 2142. Audits.
        ``Sec. 2143. Demonstration project authority.
        ``Sec. 2144. Definitions and determinations of income.
Sec. 2102. Division of medicaid benefits into core benefits and 
                            supplemental benefits for AFDC, SSI, and 
                            non-cash beneficiaries; limitation on 
                            Federal financial participation for core 
                            and supplemental benefits.
Sec. 2103. Operation of program as State plan requirement under 
                            medicaid.
Sec. 2104. Application of miscellaneous provisions.
                     TITLE III--ACCESS IMPROVEMENTS

               Subtitle A--Improved Access in Rural Areas

      Part 1--Grants to Encourage Community Rural Health Networks

Sec. 3001. Assistance for development of access plans for chronically 
                            underserved areas.
Sec. 3002. Technical assistance grants for networks.
Sec. 3003. Development grants for networks.
Sec. 3004. Definitions.
Part 2--Incentives for Health Professionals to Practice in Rural Areas 
           Through the National Health Service Corps Program

Sec. 3011. National Health Service Corps loan repayments excluded from 
                            gross income.
Sec. 3012. Modification in criteria for designation as health 
                            professional shortage area.
Sec. 3013. Other provisions regarding National Health Service Corps.
             Part 3--Assistance for Institutional Providers

                  Subpart A--Emergency Medical Systems

Sec. 3021. Emergency medical services.
Sec. 3022. Grants to States regarding aircraft for transporting rural 
                            victims of medical emergencies.
 Subpart B--Demonstration Projects to Encourage Primary Care and Rural-
                    Based Graduate Medical Education

Sec. 3031. State and consortium demonstration projects.
Sec. 3032. Goals for projects.
Sec. 3033. Definitions.
   Subpart C--Medicare Demonstration Regarding Consortia of Hospitals

Sec. 3041. Medicare demonstration regarding consortia of hospitals.
                    Subtitle B--Public Health Grants

Sec. 3101. Grants to States for public health programs.
Sec. 3102. Scholarship and loan repayment programs regarding service in 
                            public health positions.
                  Subtitle C--Academic Health Centers

Sec. 3201. Study of payments for medical education at sites other than 
                            hospitals.
Sec. 3202. Study of funding needs of health professions schools.
                      TITLE IV--MALPRACTICE REFORM

               Subtitle A--Findings; Purpose; Definitions

Sec. 4001. Findings; purpose.
Sec. 4002. Definitions.
          Subtitle B--Uniform Standards for Malpractice Claims

Sec. 4101. Applicability.
Sec. 4102. Requirement for initial resolution of action through 
                            alternative dispute resolution.
Sec. 4103. Procedural requirements for filing of actions.
Sec. 4104. Treatment of noneconomic and punitive damages.
Sec. 4105. Periodic payments for future losses.
Sec. 4106. Uniform statute of limitations.
Sec. 4107. Special provision for certain obstetric services.
Sec. 4108. Uniform standard for determining liability in actions based 
                            on negligence.
Sec. 4109. Jurisdiction of Federal courts.
Sec. 4110. Preemption.
   Subtitle C--Requirements for State Alternative Dispute Resolution 
                             Systems (ADR)

Sec. 4201. Basic requirements.
Sec. 4202. Certification of State systems; applicability of alternative 
                            Federal system.
Sec. 4203. Grants to States.
Sec. 4204. Reports on implementation and effectiveness of alternative 
                            dispute resolution systems.
  Subtitle D--Grants to States for Development of Practice Guidelines

Sec. 4301. Grants to States.
             TITLE V--MARKET INCENTIVES TO CONTAINING COSTS

               Subtitle A--Administrative Simplification

Sec. 5000. Purpose.
Sec. 5001. Definitions.
          Part 1--Standards for Data Elements and Transactions

Sec. 5011. General requirements on Secretary.
Sec. 5012. Standards for data elements of health information.
Sec. 5013. Information transaction standards.
Sec. 5014. Health information network privacy standards.
Sec. 5015. Timetables for adoption of standards.
     Part 2--Requirements With Respect to Certain Transactions and 
                              Information

Sec. 5021. Standard transactions and information.
Sec. 5022. Accessing health information for authorized purposes.
Sec. 5023. Ensuring availability of information.
Sec. 5024. Timetables for compliance with requirements.
                    Part 3--Miscellaneous Provisions

Sec. 5031. Standards and certification for health information network 
                            services.
Sec. 5032. Imposition of additional requirements.
Sec. 5033. Effect on State law.
                         Subtitle B--Antitrust

Sec. 5101. Publication of antitrust guidelines on activities of health 
                            plans.
Sec. 5102. Issuance of health care certificates of public advantage.
Sec. 5103. Study of impact on competition.
                           TITLE VI--MEDICARE

 Subtitle A--Increased Beneficiary Choice; Improved Program Efficiency

                  Part 1--Increased Beneficiary Choice
Sec. 6001. Requirements for health maintenance organizations under 
                            medicare.
Sec. 6002. Expansion and revision of medicare select policies.
Sec. 6003. Including notice of available health maintenance 
                            organizations in annual notice to 
                            beneficiaries.
Sec. 6004. Legislative proposal on enrolling medicare beneficiaries in 
                            qualified health plans.
Sec. 6005. Optional interim enrollment of medicare beneficiaries in 
                            private health plans.
                  Part 2--Improved Program Efficiency

Sec. 6011. Improved efficiency through consolidation of administration 
                            of parts A and B.
               Part 3--Notice of Advance Directive Rights

Sec. 6021. Providing notice of rights regarding medical care to 
                            individuals entering medicare.
                          Subtitle B--Savings

Sec. 6101. Reduction in conversion factor for physician fee schedule 
                            for non-primary care services.
Sec. 6102. Reduction in hospital outpatient services through 
                            establishment of prospective payment 
                            system.
Sec. 6103. Increase in medicare part B premium for individuals with 
                            high income.
Sec. 6104. Phased-in elimination of medicare hospital disproportionate 
                            share adjustment payments.
Sec. 6105. Imposition of coinsurance on laboratory services.
    TITLE I--ASSURING AVAILABILITY AND CONTINUITY OF HEALTH COVERAGE

                      Subtitle A--Insurance Reform
                                                    Title I, Subtitle A
              PART 1--GUARANTEED ACCESS TO HEALTH COVERAGE

SEC. 1001. GUARANTEED OFFER BY CARRIERS.

    (a) In General.--Each carrier that offers health insurance coverage 
in the individual/small group market in a fair rating area (as defined 
in section 1903) shall make available, to each qualifying individual 
(as defined in section 1904(3)) or small employer (covered in such 
market) in such fair rating area--
            (1) qualified standard coverage consistent with section 
        1102, and
            (2) subject to subsection (b), qualified high-deductible 
        coverage consistent with section 1103.
    (b) High-Deductible Coverage.--
            (1) Exception for health maintenance organizations.--The 
        requirement of subsection (a)(2) shall not apply with respect 
        to health insurance coverage that--
                    (A) is provided by a Federally qualified health 
                maintenance organization (as defined in section 1301(a) 
                of the Public Health Service Act), or
                    (B) is not provided by such an organization but is 
                provided by an organization recognized under State law 
                as a health maintenance organization or managed care 
                organization or a similar organization regulated under 
                State law for solvency.
            (2) Limitation on offer of high-deductible coverage.--
        Qualified high-deductible coverage may not be made available by 
        a carrier to a qualifying individual (or to a small employer 
        with respect to an employee) unless the carrier also makes 
        available qualified standard coverage that has identical 
        benefits (other than the amount of the deductible) and the 
        individual or employee demonstrates to the carrier that the 
        individual or employee has available assets (as defined by the 
        Secretary) equal to at least the deductible amount established 
        under section 1104(b)(1) applicable to the high-deductible 
        coverage. A carrier may not make available to an individual 
        health coverage (other than coverage for supplemental benefits) 
        the actuarial value of which is less than the actuarial value 
        of qualified high-deductible coverage, unless the individual 
        has available assets (as defined by the Secretary) equal to at 
        least the deductible amount of the coverage offered.
            (3) Option to offer medisave coverage.--The offer of high-
        deductible coverage under subsection (a)(2) may be accompanied 
        by the contribution by an employer to a medical savings account 
        (in accordance with section 7705 of the Internal Revenue Code 
        of 1986).
    (c) Coverage of Entire Rating Area.--
            (1) In general.--With respect to each fair rating area for 
        which a carrier offers health insurance coverage, the carrier 
        shall provide for coverage of benefits for items and services 
        furnished throughout the fair rating area.
            (2) Special rule for carriers offering coverage in multi-
        state metropolitan statistical areas.--In the case of a carrier 
        that offers qualified health insurance coverage in the 
        individual/small employer market in a portion of a State that 
        is located in an interstate metropolitan statistical area, the 
        carrier may not provide such coverage with respect to an 
        individual or employer in such metropolitan statistical area 
        unless the carrier also offers such coverage in other portions 
        of the area located in other States.
            (3) Special rule for coverage through managed care 
        arrangement.--In the case of coverage offered by a carrier or 
        under a group health plan to the extent that it provides 
        benefits through a managed care arrangement in a fair rating 
        area, this subsection shall not be construed as requiring the 
        establishment of facilities throughout the area, if the 
        facilities are located consistent with section 1002(b)(1).
    (d) Family Coverage Option.--The offer of coverage under this 
section with respect to an individual shall include the option of 
coverage of family members of the individual.
    (e) Limitation on Carriers.--A carrier may not require an employer 
under a group health plan to impose through a waiting period for health 
coverage under a plan or similarly require a limitation or condition on 
health coverage or benefits based on--
            (1) the health status of an individual,
            (2) claims experience of an individual,
            (3) receipt of health care by an individual,
            (4) medical history of an individual,
            (5) receipt of public subsidies by an individual, or
            (6) lack of evidence of insurability of an individual.
    (f) Construction for MEWAs.--Nothing in this section shall be 
construed as requiring a multiple employer welfare arrangement that 
provides health coverage other than through a carrier to meet the 
requirements of this section.

SEC. 1002. GUARANTEED ISSUE BY CARRIERS.

    (a) In General.--Subject to subsections (b) and (c) and section 
1003, each carrier that offers health insurance coverage in the 
individual/small group market in a fair rating area--
            (1) must accept every small employer in the area that 
        applies for such coverage during an enrollment period provided 
        under section 1005; and
            (2) must accept for enrollment under such coverage every 
        qualifying individual (and family member of such an individual) 
        who applies for enrollment during an enrollment period provided 
        under section 1005 and may not place any restriction on the 
        eligibility of an individual to enroll so long as such 
        individual is a qualifying individual.
    (b) Special Rules for Managed Care Arrangements.--In the case of 
coverage offered by a carrier or under a group health plan that 
provides benefits through a managed care arrangement in a fair rating 
area, the carrier or plan--
            (1) need not establish facilities for the delivery of 
        health care services throughout the area so long as such 
        facilities are located in a manner that does not discriminate 
        on the basis of health status of individuals residing in 
        proximity to such facilities, and
            (2) may deny such coverage in a fair rating area to 
        employers or individuals if the organization demonstrates to 
        the applicable regulatory authority that--
                    (A) it will not have the capacity to deliver 
                services adequately to enrollees of any additional 
                groups or additional enrollees because of its 
                obligations to existing group contract holders and 
                enrollees, and
                    (B) it is applying this paragraph uniformly to all 
                employers and individuals without regard to the health 
                status, claims experience, or duration of coverage of 
                those employers and their employees.
Coverage may be denied under paragraph (2) only if the denial is 
applied during a consecutive period of at least 180 days.
    (c) Special Rule for Financial Capacity Limits.--In addition to the 
authority provided under subsection (b)(2), in the case of coverage 
offered by any carrier, the carrier may deny coverage to a small 
employer or individual if the carrier demonstrates to the applicable 
regulatory authority that--
            (1) it does not have the financial reserves necessary to 
        underwrite additional coverage, and
            (2) it is applying this subsection uniformly to all 
        employers and individuals without regard to the health status, 
        claims experience, or duration of coverage of those employers 
        and their employees.
Coverage may be denied under this subsection only if the denial is 
applied during a consecutive period of at least 180 days.
    (d) Treatment of Certain MEWAs.--Subsection (a) shall not apply to 
a carrier if the only coverage offered by the carrier in the 
individual/small group market is through one or more multiple employer 
welfare arrangements. In the case of coverage offered by a carrier in 
the individual/small group market through a multiple employer welfare 
arrangement and to which the previous sentence does not apply, the 
requirements of subsection (a) shall apply to the carrier and not to 
the arrangement.

SEC. 1003. GUARANTEED RENEWAL.

    (a) Limitation on Termination by Carriers.--A carrier may not deny, 
cancel, or refuse to renew health coverage of a qualifying individual 
or eligible employer within a type of coverage option described in 
section 1903(14) except--
            (1) on the basis of nonpayment of premiums,
            (2) on the basis of fraud or misrepresentation, or
            (3) subject to subsection (b), in a fair rating area 
        because the carrier is ceasing to provide any health insurance 
        coverage in the individual/small group market within such type 
        of coverage option in the area.
    (b) Limitations on Market Exit by Carriers.--
            (1) Notice, etc.--Subsection (a)(3) shall not apply to a 
        carrier ceasing to provide health insurance coverage unless--
                    (A) such termination of coverage takes effect at 
                the end of a contract year, and
                    (B) the carrier provides notice of such termination 
                to employers and individuals covered at least 30 days 
                before the date of an annual open enrollment period 
                established with respect to the employer or individual 
                under section 1005.
            (2) Limitation on reentry in individual/small group 
        market.--If a carrier ceases to offer or provide health 
        insurance coverage in an area with respect to the individual/
        small group market for a type of coverage option, the insurer 
        may not offer health insurance coverage in the area in such 
        market within such type of coverage option until 5 years after 
        the date of the termination.
    (c) Rule for Multiemployer Plans and Multiple Employer Health.--A 
multiemployer plan and a multiple employer health plan may not cancel 
coverage or deny renewal of coverage under such a plan with respect to 
an employer other than--
            (1) for nonpayment of contributions,
            (2) for fraud or other misrepresentation by the employer, 
        or
            (3) because the plan is ceasing to provide any coverage in 
        a geographic area.

SEC. 1004. RESTRICTING PREEXISTING CONDITION EXCLUSIONS.

    (a) In General.--Except as provided in this section, a carrier or 
group health plan providing health coverage may not exclude health 
coverage with respect to services related to treatment of a condition 
based on the fact that the condition of an individual existed before 
the effective date of coverage of the individual.
    (b) Limited 6-month Exclusion Permitted.--
            (1) In general.--Subject to paragraph (2) and subsections 
        (c) through (e), a carrier or group health plan providing 
        health coverage may exclude health coverage with respect to 
        services related to treatment of a condition of an individual 
        based on the fact that the condition existed before the 
        effective date of coverage of the individual only if the period 
        of the exclusion does not exceed 6 months beginning on the date 
        of coverage.
            (2) Crediting of previous coverage.--
                    (A) In general.--A carrier or group health plan 
                providing health coverage shall provide that if a 
                covered individual is in a period of continuous 
                coverage (as defined in subparagraph (C)) as of a date 
                upon which coverage is initiated or reinitiated, any 
                period of exclusion of coverage with respect to a 
                preexisting condition (as defined in subparagraph (B)) 
                for such services or type of services shall be reduced 
                by 1 month for each month in the period of continuous 
                coverage.
                    (B) Preexisting condition defined.--In this 
                paragraph, the term ``preexisting condition'' means, 
                with respect to health coverage, a condition which has 
                been diagnosed or treated during the 6-month period 
                ending on the day before the first date of such 
                coverage (without regard to any waiting period).
                    (C) Period of continuous coverage.--In this part, 
                the term ``period of continuous coverage'' means the 
                period beginning on the date an individual has health 
                coverage (or coverage under a public plan providing 
                medical benefits) and ends on the date the individual 
                does not have such coverage for a continuous period of 
                more than 3 months (or 6 months in the case of an 
                individual who loses coverage due to involuntary 
                termination of employment, other than by reason of an 
                employee's gross misconduct).
    (c) Exclusion Not Applicable to Pregnancy.--Any exclusion of 
coverage under subsection (b)(1) shall not apply if the exclusion 
relates to pregnancy.
    (d) Exclusion Not Applicable to Newborns and Adopted Children.--
            (1) Newborns.--Any exclusion of coverage under subsection 
        (b)(1) shall not apply to a child who is covered at the time of 
        birth and remains in a period of continuous coverage after such 
        time.
            (2) Adopted children.--Any exclusion of coverage under 
        subsection (b)(1) shall not apply (beginning on the date of 
        adoption) to an adopted child who is covered at the time of 
        adoption and remains in a period of continuous coverage after 
        such time.
    (e) Exclusion Not Applicable to Individuals Enrolled or Enrolling 
During Certain Open Enrollment Periods.--
            (1) Individuals enrolling during period.--In the case of an 
        individual who enrolls and obtains coverage during an open 
        enrollment period described in section 1005(b), any exclusion 
        of coverage under subsection (b)(1) shall not apply so long as 
        the individual remains in a period of continuous coverage.
            (2) Individuals enrolled at beginning of period.--In the 
        case of an individual who has health coverage as of the first 
        day of the initial open enrollment period described in section 
        1005(b)(1), any exclusion of coverage under subsection (b)(1) 
        shall not apply as of such date and so long as the individual 
        is in a period of continuous coverage.
    (f) Application of Rules by Certain Health Maintenance 
Organizations.--A health maintenance organization that provides health 
insurance coverage shall not be considered as failing to meet the 
requirements of section 1301 of the Public Health Service Act 
notwithstanding that it provides for an exclusion of the coverage based 
on a preexisting condition consistent with the provisions of this part 
so long as such exclusion is applied consistent with the provisions of 
this part.

SEC. 1005. ENROLLMENT PERIODS.

    (a) In General.--Each carrier and each group health plan providing 
health coverage (and each health plan purchasing organization under 
subtitle A of title V) in the individual/small group market shall 
permit qualifying individuals and eligible employers to obtain health 
coverage from the carrier or group health plan during each enrollment 
period provided under this section.
    (b) Open Enrollment Periods for Which Preexisting Condition 
Exclusions Waived.--
            (1) Initial period.--There shall be an initial open 
        enrollment period, with respect to individuals and employees 
        who are residents of a State, during the 60-day period 
        beginning on January 1, 1997.
            (2) Individuals eligible for subsidies.--There shall be an 
        individual open enrollment period with respect to an individual 
        at the time the individual first becomes eligible for any 
        premium assistance under part A of title XXI of the Social 
        Security Act, during the 60-day period beginning on the first 
        date the individual meets eligibility criteria within any 12-
        month period.
            (3) Court orders.--If a court has ordered that coverage be 
        provided for a spouse or child of an employee or individual 
        under health coverage of the employee or individual, there 
        shall be an open enrollment period during the 30-day period 
        beginning on the date of issuance of the court order.
            (4) Enrollment of newborns and newly adopted children.--
        There shall be an open enrollment period with respect to a 
        newborn child and a newly adopted child during the 30-day 
        period beginning on the date of the birth or adoption of a 
        child, if family coverage is available as of such date.
    (c) Annual Open Enrollment Periods for Which Preexisting Condition 
Exclusions May Apply.--
            (1) In general.--Each carrier and each group health plan 
        providing health coverage (and each health plan purchasing 
        organization under subtitle A of title V) in the individual/
        small group market shall provide for at least one annual open 
        enrollment period (of not less than 30 days) each year. Such 
        period shall be in addition to the open enrollment periods 
        described in subsection (b).
            (2) Coordination.--
                    (A) Carriers in individual/small group market.--
                Such annual open enrollment periods with respect to 
                carriers in the individual/small group market are 
                subject to coordination by States.
    (d) Other Open Enrollment Periods for Which Preexisting Condition 
Exclusions May Apply.--
            (1) Termination of residence area.--For each qualifying 
        individual, at the time the individual terminates residence in 
        the service area of coverage provided by a carrier to the 
        individual, there shall be an open enrollment period (of not 
        less than 30 days) during which the individual may enroll in 
        health coverage.
            (2) Family or employment changes.--In the case of a 
        qualifying individual who--
                    (A) through divorce or death of a family member 
                experiences a change in family composition, or
                    (B) experiences a change in employment status 
                (including a significant change in the terms and 
                conditions of employment or the terms and conditions of 
                employment of a spouse),
        there shall be an open enrollment period (of at least 30 days) 
        in which the individual is permitted to change the individual 
        or family basis of coverage or the health coverage in which the 
        individual is enrolled. The circumstances under which such 
        enrollment periods are required and the duration of such 
        periods shall be specified by the Secretary.
            (3) Enrollment due to loss of previous coverage.--In the 
        case of a qualifying individual who--
                    (A) had health coverage at the time of an 
                individual's enrollment period,
                    (B) stated at the time of such period that having 
                other health coverage was the reason for declining 
                enrollment, and
                    (C) lost the other health coverage as a result of 
                the termination of the coverage, termination or 
                reduction of employment, or other reason, except 
                termination at the option of the individual,
        there shall be an open enrollment period during the 30-day 
        period beginning on the date of termination of the other 
        coverage.
            (4) Enrollment at time of marriage.--There shall be an open 
        enrollment period with respect to the spouse of an individual 
        (including children of the spouse) during the 30-day period 
        beginning on the date of the marriage, if family coverage is 
        available as of such date.
            (5) No effect on cobra continuation benefits.--Nothing in 
        this subsection shall be construed as affecting rights of 
        individuals to continuation coverage under section 4980B of the 
        Internal Revenue Code of 1986, part 6 of subtitle B of title I 
        of the Employee Retirement Income Security Act of 1974, or 
        title XXII of the Public Health Service Act.
    (e) Period of Coverage.--
            (1) In general.--In the case of a qualifying individual who 
        enrolls under health coverage during an open enrollment period 
        under this section, coverage shall begin on such date (not 
        later than the first day of the first month that begins at 
        least 15 days after the date of enrollment) as the Secretary 
        shall specify, consistent with this subsection.
            (2) Coverage of family members.--In the case of an open 
        enrollment period described in subsection (b)(3), (b)(4), or 
        (d)(4), the Secretary shall provide for coverage of family 
        members to begin as soon as possible on or after the date of 
        the event that gives rise to the special enrollment period (or, 
        in the case of birth or adoption, as of the date of birth or 
        adoption).
                     PART 2--PROVISION OF BENEFITS

SEC. 1011. STANDARDS FOR MANAGED CARE ARRANGEMENTS.

    (a) Application of Requirements.--Each group health plan, and each 
carrier providing health insurance coverage, that provides for health 
care through a managed care arrangement (as defined in section 
1903(11)(A)) shall comply with the applicable requirements of this 
section.
    (b) Consumer Disclosure.--
            (1) In general.--The group health plan, or carrier 
        providing health insurance coverage, that provides for health 
        care shall assure that, before an individual is enrolled with 
        the plan or carrier, the individual is provided with 
        information about the arrangements between the entity providing 
        for the managed care arrangement and health care providers for 
        the provision of covered benefits, including the following:
                    (A) Emergency services.--Arrangements for access to 
                emergency care services inside and outside the provider 
                network (including designated trauma centers), 
                including any requirements for prior authorization.
                    (B) Specialized treatment.--Arrangements for access 
                to specialized treatment providers (such as centers of 
                excellence).
                    (C) Choice of personal physician.--Ability of 
                enrollees to choose (and change the selection of) a 
                personal physician from among available participating 
                physicians and change that selection as appropriate.
                    (D) Essential community providers.--Arrangements 
                for access to essential community providers, including 
                disproportionate share hospitals, sole community 
                hospitals, medicare-dependent, small rural hospitals, 
                Federally qualified health centers, rural health 
                clinics, local health departments, and children's 
                hospitals.
            (2) Designation of centers of excellence.--The Secretary 
        shall establish a process for the designation of facilities, 
        including children's hospitals and other pediatric facilities, 
        as centers of excellence for purposes of this subsection. A 
        facility may not be designated unless the facility is 
        determined--
                    (A) to provide specialty care,
                    (B) to deliver care for complex cases requiring 
                specialized treatment and for individuals with chronic 
                diseases, and
                    (C) to meet other requirements that may be 
                established by the Secretary relating to specialized 
                education and training of health professionals, 
                participation in peer-reviewed research, or treatment 
                of patients from outside the geographic area of the 
                facility.
    (c) Provider Disclosure and Due Process Relating to Provider 
Networks.--
            (1) Disclosure.--The entity providing for a managed care 
        arrangement under which health coverage shall provide that 
        before entering into a contract with health care providers with 
        respect to the entity's provider network, the provider is given 
        information concerning the terms and conditions of the 
        provider's involvement with the network, including the 
        following:
                    (A) Standards for selection of providers for 
                network.--Information concerning the standards 
                (including criteria for quality, efficiency, 
                credentialing, and services) to be used by the entity 
                for contracting with health care providers with respect 
                to the entity's provider network.
                    (B) Review process.--Information concerning the 
                process under which a provider may request a review of 
                the entity's decision to terminate or refuse to renew 
                the provider's participation agreement.
            (2) Written notice of denials.--The entity providing for 
        the managed care arrangement shall provide written notice to 
        the provider of any denial of an application to participate in 
        the provider network.
            (3) Termination process.--
                    (A) In general.--The entity may not terminate or 
                refuse to renew a participation agreement with a 
                provider in the entity's provider network unless the 
                entity provides written notification to the provider of 
                the entity's decision to terminate or refuse to renew 
                the agreement. The notification shall include a 
                statement of the reasons for the entity's decision, 
                consistent with any standards described in paragraph 
                (1)(A).
                    (B) Timing of notification.--The entity shall 
                provide the notification required under subparagraph 
                (A) at least 30 days prior to the
                 effective date of the termination or expiration of the 
agreement (whichever is applicable). The previous sentence shall not 
apply if failure to terminate the agreement prior to the deadline would 
adversely affect the health or safety of a covered individual.
    (d) No Referral Required for Obstetrics and Gynecology.--A carrier 
or group health plan may not require an individual to obtain a referral 
from a physician in order to obtain covered items and services from a 
physician who specializes in obstetrics and gynecology.
    (e) Preemption of State Law Restrictions on Managed Care 
Arrangements.--
            (1) Limitation on restrictions on network plans.--Effective 
        as of January 1, 1997--
                    (A) a State may not prohibit or limit a carrier or 
                group health plan providing health coverage from 
                including incentives for enrollees to use the services 
                of participating providers;
                    (B) a State may not prohibit or limit such a 
                carrier or plan from limiting coverage of services to 
                those provided by a participating provider;
                    (C) a State may not prohibit or limit the 
                negotiation of rates and forms of payments for 
                providers by such a carrier or plan with respect to 
                health coverage;
                    (D) a State may not prohibit or limit such a 
                carrier or plan from limiting the number of 
                participating providers;
                    (E) a State may not prohibit or limit such a 
                carrier or plan from requiring that services be 
                provided (or authorized) by a practitioner selected by 
                the enrollee from a list of available participating 
                providers or, except as provided in subsection 1011(d), 
                from requiring enrollees to obtain referral in order to 
                have coverage for treatment by a specialist or health 
                institution; and
                    (F) a State may not prohibit or limit the corporate 
                practice of medicine.
            (2) Definitions.--In this subsection:
                    (A) Managed care coverage.--The term ``managed care 
                coverage'' means health coverage to the extent the 
                coverage is provided through a managed care arrangement 
                (as defined in section 1903(11)(A)) that meets the 
                applicable requirements of this section.
                    (B) Participating provider.--The term 
                ``participating provider'' means an entity or 
                individual which provides, sells, or leases health care 
                services as part of a provider network (as defined in 
                section 1903(11)(B)).

SEC. 1012. REPORT ON UTILIZATION REVIEW STANDARDS.

    (a) Study.--The Secretary shall provide for a study on the 
feasibility and appropriateness of--
            (1) establishing standards for utilization review programs, 
        and
            (2) prohibiting group health plans and carriers providing 
        health insurance coverage from denying coverage of or payment 
        for items and services on the basis of a utilization review 
        program unless the program meets such standards.
    (b) Report.--Not later than 18 months after the date of the 
enactment of this Act, the Secretary shall submit to Congress a report 
on the study under subsection (a). The Secretary shall include the 
report recommendations regarding the application of standards for 
utilization review programs to group health plans and carriers 
providing health insurance coverage.
    (c) Preemption.--For provision preempting State laws relating to 
utilization review, see section 6103.

SEC. 1013. MEDICAL SAVINGS ACCOUNTS.

    (a) In General.--Chapter 79 of the Internal Revenue Code of 1986 is 
amended by adding at the end the following new section:

``SEC. 7705. MEDICAL SAVINGS ACCOUNTS.

    ``(a) General Rule.--For purposes of this title, the term `medical 
savings account' means a trust created or organized in the United 
States for the exclusive benefit of an individual or his beneficiaries, 
but only if the written instrument creating the trust meets the 
following requirements:
            ``(1) Except in the case of a rollover contribution 
        described in subsection (d)(3), no contribution will be 
        accepted unless--
                    ``(A) it is in cash, and
                    ``(B) such individual is an eligible employee for 
                the period for which such contribution is made.
            ``(2) The trustee is a bank (as defined in section 408(n)), 
        insurance company (as defined in section 816), or such other 
        person who demonstrates to the satisfaction of the Secretary 
        that the manner in which such other person will administer the 
        trust will be consistent with the requirements of this section.
            ``(3) No part of the trust funds will be invested in life 
        insurance contracts.
            ``(4) The interest of an individual in the balance of the 
        account is nonforfeitable.
            ``(5) The assets of the trust will not be commingled with 
        other property except in a common trust fund or common 
        investment fund.
    ``(b) Eligible Employee.--For purposes of this section--
            ``(1) In general.--The term `eligible employee' means any 
        employee who has high-deductible coverage (as defined in 
        section 1103 of the Health Care Improvement Act of 1995) 
        offered by the employer.
            ``(2) Exception.--An employee shall be treated as not being 
        an eligible employee for any calendar year if, for any month 
        during such year, it is reasonably expected that such 
        employee--
                    ``(A) will have adjusted gross income that is less 
                than 100 percent of the income official poverty line 
                (as determined by the Director of the Office of 
                Management and Budget) for a family of the size 
                involved; or
                    ``(B) is an AFDC recipient or SSI recipient.
            ``(3) Definitions.--For purposes of paragraph (2)--
                    ``(A) AFDC recipient.--The term `AFDC recipient' 
                means, for a month, an individual who is receiving aid 
                or assistance under any plan of the State approved 
                under title I, X, XIV, or XVI, or part A or part E of 
                title IV, of the Social Security Act for the month.
                    ``(B) SSI recipient.--The term `SSI recipient' 
                means, for a month, an individual--
                            ``(i) with respect to whom supplemental 
                        security income benefits are being paid under 
                        title XVI of the Social Security Act for the 
                        month,
                            ``(ii) who is receiving a supplementary 
                        payment under section 1616 of such Act or under 
                        section 212 of Public Law 93-66 for the month,
                            ``(iii) who is receiving monthly benefits 
                        under section 1619(a) of the Social Security 
                        Act (whether or not pursuant to section 
                        1616(c)(3) of such Act) for the month, or
                            ``(iv) who is treated under section 1619(b) 
                        of the Social Security Act as receiving 
                        supplemental security income benefits in a 
                        month for purposes of title XIX of such Act.
    ``(c) Tax Treatment of Accounts.--
            ``(1) Account taxed as grantor trust.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), the account beneficiary of a medical 
                savings account shall be treated for purposes of this 
                title as the owner of such account and shall be subject 
                to tax thereon in accordance with subpart E of part I 
                of subchapter J of this chapter (relating to grantors 
                and others treated as substantial owners).
                    ``(B) Treatment of capital losses.--With respect to 
                assets held in a medical savings account, any capital 
                loss for a taxable year from the sale or exchange of 
                such an asset shall be allowed only to the extent of 
                capital gains from such assets for such taxable year. 
                Any capital loss which is disallowed under the 
                preceding sentence shall be treated as a capital loss 
                from the sale or exchange of such an asset in the next 
                taxable year. For purposes of this subparagraph, all 
                medical savings accounts of the account beneficiary 
                shall be treated as 1 account.
            ``(2) Account terminates if individual engages in 
        prohibited transaction.--
                    ``(A) In general.--If, during any taxable year of 
                the account beneficiary, such beneficiary engages in 
                any transaction prohibited by section 4975 with respect 
                to the account, the account shall cease to be a medical 
                savings account as of the first day of such taxable 
                year.
                    ``(B) Account treated as distributing all its 
                assets.--In any case in which any account ceases to be 
                a medical savings account by reason of subparagraph (A) 
                on the first day of any taxable year, subsection (d) 
                shall be applied as if--
                            ``(i) there were a distribution on such 
                        first day in an amount equal to the fair market 
                        value (on such first day) of all assets in the 
                        account (on such first day), and
                            ``(ii) no portion of such distribution were 
                        used to pay qualified medical expenses.
            ``(3) Effect of pledging account as security.--If, during 
        any taxable year, the account beneficiary uses the account or 
        any portion thereof as security for a loan, the portion so used 
        is treated as distributed and not used to pay qualified medical 
        expenses.
    ``(d) Tax Treatment of Distributions.--
            ``(1) Inclusion of amounts not used for qualified medical 
        expenses.--
                    ``(A) In general.--Any amount paid or distributed 
                out of a medical savings account which is not used 
                exclusively to pay the qualified medical expenses of 
                the account beneficiary or of the spouse or dependents 
                (as defined in section 152) of such beneficiary shall 
                be included in the gross income of such beneficiary to 
                the extent such amount does not exceed the excess of--
                            ``(i) the aggregate contributions to such 
                        account which were not includible in gross 
                        income by reason of section 106(2), over
                            ``(ii) the aggregate prior payments or 
                        distributions from such account which were 
                        includible in gross income under this 
                        paragraph.
                    ``(B) Special rules.--For purposes of subparagraph 
                (A)--
                            ``(i) all medical savings accounts of the 
                        account beneficiary shall be treated as 1 
                        account,
                            ``(ii) all payments and distributions 
                        during any taxable year shall be treated as 1 
                        distribution, and
                            ``(iii) any distribution of property shall 
                        be taken into account at its fair market value 
                        on the date of the distribution.
            ``(2) Penalty for distributions not used for qualified 
        medical expenses.--
                    ``(A) In general.--The tax imposed by chapter 1 on 
                the account beneficiary for any taxable year in which 
                there is a payment or distribution from a medical 
                savings account of such beneficiary which is includible 
                in gross income under paragraph (1) shall be increased 
                by 100 percent of the amount which is so includible.
                    ``(B) Exception for death.--Subparagraph (A) shall 
                not apply if the payment or distribution is made after 
                the account beneficiary dies.
            ``(3) Rollover contribution.--An amount is described in 
        this paragraph as a rollover contribution if it meets the 
        requirements of subparagraphs (A) and (B).
                    ``(A) In general.--Paragraph (1) shall not apply to 
                any amount paid or distributed from a medical savings 
                account to the account beneficiary to the extent the 
                amount received is paid into a medical savings account 
                for the benefit of such beneficiary not later than the 
                60th day after the day on which he receives the payment 
                or distribution.
                    ``(B) Limitation.--This paragraph shall not apply 
                to any amount described in subparagraph (A) received by 
                an individual from a medical savings account if, at any 
                time during the 1-year period ending on the day of such 
                receipt, such individual received any other amount 
                described in subparagraph (A) from a medical savings 
                account which was not includible in his gross income 
                because of the application of this paragraph.
            ``(4) Coordination with medical expense deduction.--For 
        purposes of section 213, any payment or distribution out of a 
        medical savings account for qualified medical expenses shall 
        not be treated as an expense paid for medical care to the 
        extent of the amount of such payment or distribution which is 
        excludable from gross income solely by reason of paragraph 
        (1)(A).
    ``(e) Definitions.--For purposes of this section--
            ``(1) Qualified medical expenses.--The term `qualified 
        medical expenses' means any expense for medical care (as 
        defined in section 213(d)); except that such term shall not 
        include any amount paid for insurance.
            ``(2) Account beneficiary.--The term `account beneficiary' 
        means the individual for whose benefit the medical savings 
        account is maintained.
    ``(f) Custodial Accounts.--For purposes of this section, a 
custodial account shall be treated as a trust if--
            ``(1) the assets of such account are held by a bank (as 
        defined in section 408(n)), insurance company (as defined in 
        section 816), or another person who demonstrates to the 
        satisfaction of the Secretary that the manner in which he will 
        administer the account will be consistent with the requirements 
        of this section, and
            ``(2) the custodial account would, except for the fact that 
        it is not a trust, constitute a medical savings account 
        described in subsection (a).
For purposes of this title, in the case of a custodial account treated 
as a trust by reason of the preceding sentence, the custodian of such 
account shall be treated as the trustee thereof.
    ``(g) Reports.--The trustee of a medical savings account shall keep 
such records and make such reports regarding such account to the 
Secretary and to the account beneficiary with respect to contributions, 
distributions, and such other matters as the Secretary may require 
under regulations. The reports required by this subsection shall be 
filed at such time and in such manner and furnished to such individuals 
at such time and in such manner as may be required by such 
regulations.''
    (b) Income and Employment Tax Treatment of Employer 
Contributions.--
            (1) Employer payments excluded from gross income.--The text 
        of section 106 of such Code is amended to read as follows:
    ``Gross income of an employee does not include--
            ``(1) employer-provided coverage under an accident or 
        health plan, and
            ``(2) employer contributions to any medical savings account 
        (as defined in section 7705) of an eligible employee, but only 
        to the extent that the amount contributed does not exceed the 
        excess of premium for standard coverage over the premium for 
        high-deductible coverage (as such terms are defined in section 
        1903 of the Health Care Improvement Act of 1995).''
            (2) Employer payments excluded from employment tax base.--
                    (A) Social security taxes.--
                            (i) Subsection (a) of section 3121 of such 
                        Code is amended by striking ``or'' at the end 
                        of paragraph (20), by striking the period at 
                        the end of paragraph (21) and inserting ``; 
                        or'', and by inserting after paragraph (21) the 
                        following new paragraph:
            ``(22) any payment made to or for the benefit of an 
        employee if at the time of such payment it is reasonable to 
        believe that the employee will be able to exclude such payment 
        from income under section 106(2).''
                            (ii) Subsection (a) of section 209 of the 
                        Social Security Act is amended by striking 
                        ``or'' at the end of paragraph (18), by 
                        striking the period at the end of paragraph 
                        (19) and inserting ``; or'', and by inserting 
                        after paragraph (19) the following new 
                        paragraph:
            ``(20) any payment made to or for the benefit of an 
        employee if at the time of such payment it is reasonable to 
        believe that the employee will be able to exclude such payment 
        from income under section 106(2) of the Internal Revenue Code 
        of 1986.''
                    (B) Railroad retirement tax.--Subsection (e) of 
                section 3231 of such Code is amended by adding at the 
                end the following new paragraph:
            ``(10) Medical savings account contributions.--The term 
        `compensation' shall not include any payment made to or for the 
        benefit of an employee if at the time of such payment it is 
        reasonable to believe that the employee will be able to exclude 
        such payment from income under section 106(2).''
                    (C) Unemployment tax.--Subsection (b) of section 
                3306 of such Code is amended by striking ``or'' at the 
                end of paragraph (15), by striking the period at the 
                end of paragraph (16) and inserting ``; or'', and by 
                inserting after paragraph (16) the following new 
                paragraph:
            ``(17) any payment made to or for the benefit of an 
        employee if at the time of such payment it is reasonable to 
        believe that the employee will be able to exclude such payment 
        from income under section 106(2).''
                    (D) Withholding tax.--Subsection (a) of section 
                3401 of such Code is amended by striking ``or'' at the 
                end of paragraph (19), by striking the period at the 
                end of paragraph (20) and inserting ``; or'', and by 
                inserting after paragraph (20) the following new 
                paragraph:
            ``(21) any payment made to or for the benefit of an 
        employee if at the time of such payment it is reasonable to 
        believe that the employee will be able to exclude such payment 
        from income under section 106(2).''
    (c) Technical Amendments.--
            (1) Tax on prohibited transactions.--Section 4975 of such 
        Code (relating to prohibited transactions) is amended--
                    (A) by adding at the end of subsection (c) the 
                following new paragraph:
            ``(4) Special rule for medical savings accounts.--An 
        individual for whose benefit a medical savings account (within 
        the meaning of section 7705) is established shall be exempt 
        from the tax imposed by this section with respect to any 
        transaction concerning such account (which would otherwise be 
        taxable under this section) if, with respect to such 
        transaction, the account ceases to be a medical savings account 
        by reason of the application of section 7705(c)(2)(A) to such 
        account.'', and
                    (B) by inserting ``or a medical savings account 
                described in section 7705'' in subsection (e)(1) after 
                ``described in section 408(a)''.
            (2) Failure to provide reports on medical savings 
        accounts.--Section 6693 of such Code (relating to failure to 
        provide reports on individual retirement account or annuities) 
        is amended--
                    (A) by inserting ``or on medical savings accounts'' 
                after ``annuities'' in the heading of such section, and
                    (B) by adding at the end of subsection (a) the 
                following: ``The person required by section 7705(g) to 
                file a report regarding a medical savings account at 
                the time and in the manner required by such section 
                shall pay a penalty of $50 for each failure unless it 
                is shown that such failure is due to reasonable 
                cause.''
            (3) Clerical amendments.--
                    (A) The table of sections for chapter 79 of such 
                Code is amended by adding at the end the following:

                              ``Sec. 7705. Medical savings accounts.''

                    (B) The table of sections for subchapter B of 
                chapter 68 of such Code is amended by inserting ``or on 
                medical savings accounts'' after ``annuities'' in the 
                item relating to section 6693.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1996.

                     PART 3--FAIR RATING PRACTICES

SEC. 1021. USE OF FAIR RATING PRACTICES.

    (a) Use of Fair Rating Practices.--The premium rate established by 
a carrier for health insurance coverage in the individual/small group 
market (including the premium rate for coverage for a small employer 
through a multiple employer welfare arrangement that is fully-insured) 
may not vary except by the following:
            (1) Age.--By age, based on classes of age established by 
        the Secretary, in consultation with the NAIC, consistent with 
        subsection (b).
            (2) Geographic area.--By geographic area, as identified by 
        a State consistent with subsection (c).
            (3) Family class.--By family class, based on the following 
        4 classes of family coverage: individual, individual with one 
        or more children, married couple without a child, and married 
        couple with one or more children.
            (4) Benefit design.--By benefit design of coverage, 
        including by type of coverage, such as standard coverage and 
        high-deductible coverage, and by type of coverage option 
        (described in section 1903(14)) with respect to standard 
        coverage.
            (5) Administrative categories.--By permitted expense 
        category, based on differences in expenses among such 
        categories, consistent with subsection (d).
The premiums shall be established for the different benefit designs 
(including standard coverage and high-deductible coverage) based on the 
actuarial value of the coverage for the population of the individual/
small group market in the fair rating area, without regard to the 
distribution of such population among the types of coverage or type of 
coverage options.
    (b) Limitation on Variation by Age.--
            (1) In general.--Any variation in premium rates by age 
        under subsection (a)(1) for age classes of individuals under 65 
        years of age may not result in the ratio of the highest age 
        rate to the lowest age rate exceeding the limiting ratio 
        described in paragraph (2).
            (2) Limiting ratio.--For purposes of paragraph (1), the 
        limiting ratio described in this paragraph is--
                    (A) 4-to-1, for premiums for months in 1997,
                    (B) 3.67-to-1, for premiums for months in 1998,
                    (C) 3.33-to-1, for premiums for months in 1999, and
                    (D) 3-to-1, for premiums for months in 2000 and any 
                succeeding year.
            (3) Separate age classes for individuals 65 years of age or 
        older.--The Secretary shall establish one or more separate age 
        classes for individuals 65 years of age or older.
            (4) Preemption.--For preemption of State laws relating to 
        establishment of premium rates, see section 5005.
    (c) Geographic Area Variations.--For purposes of subsection (a)(2), 
a State--
            (1) may not identify an area that divides a 3-digit zip 
        code, a county, or all portions of a metropolitan statistical 
        area,
            (2) shall not permit premium rates for coverage offered in 
        a portion of an interstate metropolitan statistical area to 
        vary based on the State in which the coverage is offered, and
            (3) may, upon agreement with one or more adjacent States, 
        identify multi-state geographic areas consistent with 
        paragraphs (1) and (2).
    (d) Administrative Variations.--
            (1) Expense categories.--Expense categories shall be 
        established under subsection (a)(5) by a carrier in a manner 
        that only reflects differences based on marketing, commissions, 
        and similar expenses. Such categories shall take into account 
        health plan purchasing organizations.
            (2) Limitation on variations.--The variation provided among 
        expense categories under subsection (a)(5) may not result in a 
        premium for the
         highest expense category exceeding 120 percent of the premium 
for the lowest expense category.
    (e) Premium Rating in Group Health Plans.--The premium rate 
established under a group health plan for health insurance coverage may 
not vary within a benefit design except by the factors described in 
subsection (a) and subject to the limitation specified in subsection 
(b).
    (f) Actuarial Certification.--Each carrier that offers health 
insurance coverage in a State shall file annually with the State 
commissioner of insurance a written statement by a member of the 
American Academy of Actuaries (or other individual acceptable to the 
commissioner) that, based upon an examination by the individual which 
includes a review of the appropriate records and of the actuarial 
assumptions of the carrier and methods used by the carrier in 
establishing premium rates for applicable health insurance coverage--
            (1) the carrier is in compliance with the applicable 
        provisions of this section, and
            (2) the rating methods are actuarially sound.
Each such carrier shall retain a copy of such statement for examination 
at its principal place of business.
    (g) Construction.--The provisions of this section shall apply to 
premium rates established by carriers for multiple employer welfare 
arrangements that are fully-insured or for fully-insured coverage 
offered with respect to individuals and small employers in the 
individual/small group market. Such premium rates shall apply based on 
the fair rating area in which the covered individual or employee 
resides to reflect the population in the individual/small group market.

SEC. 1022. COORDINATION WITH PREMIUM ASSISTANCE CERTIFICATE PROGRAM.

    Each carrier or group health plan providing qualified health 
coverage shall accept and apply (as a reduction against premiums 
otherwise imposed) any premium certificate issued under a State premium 
assistance program under part A of title XXI of the Social Security 
Act.

SEC. 1023. ESTABLISHMENT OF RISK ADJUSTMENT MECHANISMS.

    (a) Establishment of Standards.--
            (1) Development of models.--
                    (A) In general.--The Secretary shall request the 
                NAIC to develop, within 9 months after the date of the 
                enactment of this Act and in consultation with the 
                American Academy of Actuaries, a model risk adjustment 
                system composed of one or more risk adjustment 
                mechanisms under which premiums applicable to health 
                insurance coverage in the individual/small group market 
                and coverage under multiple employer welfare 
                arrangements that are fully insured (without regard to 
                whether such an arrangement is offered through an 
                association) would be adjusted to take into account 
                such factors as may be appropriate to predict the 
                future need and the efficient use of services by 
                covered individuals in the market. Such factors may 
                include the age, gender, geographic residence, health 
                status, or other demographic characteristics of 
                individuals enrolled in such plans and shall include 
                consideration of enrollment of a disproportionate share 
                of individuals who enroll during the initial open 
                enrollment period under section 1005(b)(1).
                    (B) Promulgation as proposed rule.--If the NAIC 
                develops such model within such period, the Secretary 
                shall publish the model as a proposed rule under 
                section 553 of title 5, United States Code. If the NAIC 
                has not developed such model within such period, the 
                Secretary shall publish (not later than 60 days after 
                the end of such period) a proposed rule that specifies 
                a proposed model that provides for effective risk 
                adjustment mechanisms.
            (2) Rule making process.--The Secretary shall provide for a 
        period (described in section 553(c) of title 5, United States 
        Code) of not less than 30 days for public comment on a proposed 
        rule published under paragraph (1)(B). The Secretary shall 
        publish a final rule, by not later than January 1, 1996, that 
        specifies risk adjustment mechanisms that the Secretary finds 
        are effective for purposes of carrying out this section. Such 
        rule shall include models developed by the NAIC if the 
        Secretary finds that such models provide for effective risk 
        adjustment mechanisms.
            (3) Modification.--The Secretary, at the request of the 
        NAIC or otherwise, may by regulation modify the model risk 
        adjustment system established under this subsection.
    (b) Implementation of Risk Adjustment System.--Each State shall 
establish and maintain a risk adjustment system that conforms with the 
model established under this section by not later than January 1, 1997. 
A State may establish and maintain such a system jointly with one or 
more other States.
                      PART 4--CONSUMER PROTECTIONS

SEC. 1031. REQUIREMENT FOR PROVISION OF INFORMATION.

    (a) Carriers.--
            (1) In general.--Each carrier that offers health insurance 
        coverage to small employers (or eligible employees of small 
        employers) or qualifying individuals must disclose to such 
        prospective enrollees, to brokers, and to health plan 
        purchasing organizations the information that the Secretary may 
        specify relating to the performance of the carrier in providing 
        such coverage and relating to differences between the coverage 
        provided and the most similar model benefit package established 
        under section 1104(b)(2). If a carrier offers to individuals or 
        employers coverage the actuarial value of which is more than 
        the actuarial value for high-deductible coverage but less than 
        such value for standard coverage, the carrier must disclose to 
        such employers or individuals detailed information on how the 
        coverage offered compares to any standard and high-deductible 
        coverage offered by the carrier to such individuals and 
        employers.
            (2) Marketing material.--Each carrier that provides any 
        health insurance coverage in a State shall file with the State 
        those marketing materials relating to the offer and sale of 
        health insurance coverage to be used for distribution before 
        the materials are used. Such materials shall be in a uniform 
        format specified under the standards established under section 
        1301.
    (b) Group Health Plans.--Each group health plan that provides 
health coverage must disclose to enrollees and potential enrollees 
information, similar to the information described in subsection (a), 
relating to performance of the plan in providing such coverage and 
relating to differences between the coverage provided and the most 
similar model benefit package established under section 1104(b)(2).
    (c) Information Relating to Risk Adjustment.--Each carrier or group 
health plan providing coverage in the individual/small group market 
(including multiple employer health plans that are fully insured, 
without regard to whether such an arrangement or plan is offered 
through an association) shall provide to the State such information as 
the State may require in order to carry out section 1023 (relating to 
risk adjustment mechanisms).

SEC. 1032. PROHIBITION OF IMPROPER INCENTIVES.

    (a) Limitation on Financial Incentives.--No carrier that provides 
health insurance coverage may vary the commission or financial or other 
remuneration to a person based on the claims experience or health 
status of individuals enrolled by or through the person.
    (b) Nondiscrimination in Agent Compensation.--A carrier--
            (1) may not vary or condition the compensation provided to 
        an agent or broker related to the sale or renewal of health 
        insurance coverage because of the health status or claims 
        experience of any individuals enrolled with the carrier through 
        the agent or broker; and
            (2) may not terminate, fail to renew, or limit its contract 
        or agreement of representation with an agent or broker for any 
        reason related to the health status or claims experience of any 
        individuals enrolled with the carrier through the agent or 
        broker.
    (c) Prohibition of Tie-in Arrangements.--No carrier that offers 
health insurance coverage may require the purchase of any other 
insurance or product as a condition for the purchase of such coverage.

SEC. 1033. WRITTEN POLICIES AND PROCEDURES RESPECTING ADVANCE 
              DIRECTIVES.

    A carrier and a group health plan offering health coverage shall 
meet the requirements of section 1866(f) of the Social Security Act 
(relating to maintaining written policies and procedures respecting 
advance directives), in-
 sofar as such requirements would apply to the carrier or plan if the 
carrier or plan were an eligible organization.
                          Subtitle B--Benefits
                                                    Title I, Subtitle B
SEC. 1101. QUALIFIED HEALTH COVERAGE.

    In this Act, the term ``qualified health coverage'' means health 
coverage that--
            (1) provides--
                    (A) standard coverage consistent with section 
                1102(a); or
                    (B) high-deductible coverage consistent with 
                section 1103; and
            (2) meets other requirements of subtitle A applicable to 
        the coverage and the carrier or group health plan providing the 
        coverage.

SEC. 1102. STANDARD COVERAGE.

    (a) In General.--Health insurance coverage is considered to provide 
standard coverage consistent with this subsection and for preventive 
benefits under subsection (b)(4) if--
            (1) benefits under such coverage are provided within at 
        least each of the required categories of benefits described in 
        paragraph (1) of subsection (b) and consistent with such 
        subsection;
            (2) the actuarial value of the benefits meets the 
        requirements of subsection (c); and
            (3) the benefits comply with the minimum requirements 
        specified in subsection (d).
    (b) Required Categories of Covered Benefits.--
            (1) In general.--The categories of covered benefits 
        described in this paragraph are the types of benefits specified 
        in each of subparagraphs (A), (B), (C), (D), (E), and (F) of 
        paragraph (1), and subparagraphs (E) and (F) of paragraph (2), 
        of section 8904(a) of title 5, United States Code (relating to 
        types of benefits required to be in health insurance offered to 
        Federal employees).
            (2) Coverage of treatments in approved research trials.--
                    (A) In general.--Coverage of the routine medical 
                costs (as defined in subparagraph (B)) associated with 
                the delivery of treatments shall be considered to be 
                medically appropriate if the treatment is part of an 
                approved research trial (as defined in subparagraph 
                (C)).
                    (B) Routine medical costs defined.--In subparagraph 
                (A), the term ``routine medical costs'' means the cost 
                of health services required to provide treatment 
                according to the design of the trial, except those 
                costs normally paid for by other funding sources (as 
                defined by the Secretary). Such costs do not include 
                the cost of the investigational agent, devices or 
                procedures themselves, the costs of any nonhealth 
                services that might be required for a person to receive 
                the treatment, or the costs of managing the research.
                    (C) Approved research trial defined.--In 
                subparagraph (A), the term ``approved research trial'' 
                means a trial--
                            (i) conducted for the primary purpose of 
                        determining the safety, effectiveness, 
                        efficacy, or health outcomes of a treatment, 
                        compared with the best available alternative 
                        treatment, and
                            (ii) approved by the Secretary.
                A trial is deemed to be approved under clause (ii) if 
                it is approved by the National Institutes of Health, 
                the Food and Drug Administration (through an 
                investigational new drug exemption), the Department of 
                Veterans Affairs, or by a qualified nongovernmental 
                research entity (as identified in guidelines issued by 
                one or more of the National Institutes of Health).
            (3) Coverage of off-label use.--An off-label use for a drug 
        that has been found to be safe and effective under section 505 
        of the Federal Food, Drug, and Cosmetic Act shall be covered if 
        the medical indication for which it is used is listed in one of 
        the following 3 compendia: the American Hospital Formulary 
        Service-Drug Information, the American Medical Association Drug 
        Evaluations, and the United States Pharmacopeia-Drug 
        Information.
            (4) Preventive benefits.--The following are preventive 
        benefits that shall be covered without any deductibles, 
        copayment, coinsurance, or other cost-sharing:
                    (A) Newborn, well-baby and well-child care.--
                Newborn care, well-baby care, and well-child care for 
                individuals under 19 years of age, including routine 
                physical examinations, routine immunizations, and 
                routine tests, as specified by the Secretary based on 
                the schedule recommended by the American Academy of 
                Pediatricians.
                    (B) Mammograms.--Routine screening mammograms 
                (including their interpretation), limited to 1 
                mammogram for a woman who is at least 35 (but less than 
                40) years of age, 1 mammogram every 2 years for a woman 
                who is at least 40 (but less than 50) years of age, and 
                1 mammogram every year for a woman who is at least 50 
                years of age.
                    (C) Screening pap smears and pelvic exams.--
                Screening pap smears and pelvic exams for women over 17 
                years of age, limited to 1 each year.
                    (D) Colorectal screening.--Colorectal screening for 
                individuals over 18 years of age at high risk, 
                consisting of 1 fecal occult blood screening test every 
                year, 1 screening sigmoidoscopy every 5 years, and 1 
                screening colonoscopy every 4 years.
                    (E) Screening tuberculin tests.--Screening 
                tuberculin tests annually for individuals at risk of 
                contracting tuberculosis.
                    (F) Prenatal care.--Prenatal care.
                    (G) Adult immunizations.--Routine immunizations for 
                an individual over 17 years of age (including booster 
                immunizations against tetanus and diphtheria, but 
                limited to 1 such immunization every 10 years).
                    (H) Prostate cancer screening.--Routine cancer 
                screening for a man who is at least 40 years of age 
                through a prostate specific antigen test, limited to 1 
                test each year.
    (c) Standard Actuarial Value.--
            (1) In general.--The actuarial value of the benefits under 
        standard coverage in a fair rating area meets the requirements 
        of this subsection if such value is equivalent to the standard 
        actuarial value described in paragraph (2) for the area. The 
        actuarial value of benefits under standard coverage shall be 
        determined using the adjustment under paragraph (3) for a 
        standardized population and set of standardized utilization and 
        cost factors.
            (2) Standard actuarial value described.--The standard 
        actuarial value described in this paragraph for coverage in a 
        geographic area is the actuarial value of benchmark coverage 
        during 1994 in such area. Such actuarial value shall be 
        determined using the adjustment under paragraph (3) for a 
        standardized population and set of standardized utilization and 
        cost factors and updated annually in accordance with section 
        1104(a).
            (3) Adjustments for standardized population, standardized 
        utilization and cost factors, and geographic area.--The 
        adjustment under this paragraph--
                    (A) for a standardized population shall be made by 
                not taking into account individuals 65 years of age or 
                older, employees of the United States Postal Service, 
                retirees, and annuitants; and
                    (B)(i) except as provided in clause (ii), for a 
                geographic area shall be made in a manner that reflects 
                the ratio of the actuarial value of benchmark coverage 
                in such geographic area (as adjusted under subparagraph 
                (A)) to such actuarial value for such benchmark 
                coverage for the United States as a whole, taking into 
                account standardized actuarial utilization and cost 
                factors, and
                    (ii) in the case of a group health plan operating 
                in more than one geographic area, the ratio described 
                in clause (i) shall be determined in accordance with 
                regulations promulgated by the Secretary.
        At the election of a group health plan under subparagraph 
        (B)(ii), the ratio under such subparagraph shall be 1.
    (d) Minimum Requirements Within a Category.--Benefits offered in 
any standard coverage within any category of benefits shall be not less 
than the narrowest scope and shortest duration of benefits within that 
category in any of the approved health benefits plans offered under 
chapter 89 of title 5, United States Code (relating to Federal 
Employees Health Benefits Program) in 1994. Benefits offered in the 
standard plan within the category of preventive services shall not 
require payment of cost-sharing for covered items and services.
    (e) No Coverage of Specific Treatment, Procedures, or Classes 
Required.--Nothing in this section (or section 1103) may be construed 
to require the coverage of any specific procedure or treatment or class 
of service in health coverage under this Act or through regulation.
    (f) Construction.--Nothing in this section (or section 1103) shall 
be construed as requiring coverage to include benefits for items and 
services that are not medically necessary or appropriate.

SEC. 1103. HIGH-DEDUCTIBLE COVERAGE.

    Health insurance coverage is considered to provide high-deductible 
coverage consistent with this section if--
            (1) benefits under such coverage comply with--
                    (A) the requirements described in section 1102(b) 
                (relating to required categories of covered benefits), 
                and
                    (B) the requirements described in section 1102(d) 
                (relating to minimum requirements within a category);
            (2) the deductible amount is the amount established under 
        section 1104(b)(1);
            (3) benefits under the coverage in any year (other than 
        preventive benefits described in section 1102(b)(4)) are 
        covered only to the extent expenses incurred for items and 
        services included in the coverage for the year exceed the 
        deductible amount specified in paragraph (2); and
            (4) the actuarial value of the coverage (as determined 
        under rules consistent with section 1102(c)) is equivalent to 
        80 percent of the actuarial value established under such 
        section for standard coverage.

SEC. 1104. ACTUARIAL VALUATION OF BENEFITS.

    (a) In General.--The Secretary, in consultation with the NAIC and 
the American Academy of Actuaries, shall establish (and may from time 
to time modify) procedures by which health insurance benefits are 
valued for purposes of this subtitle.
    (b) Deductible; Model Benefit Packages.--The Secretary, in 
consultation with the NAIC and the American Academy of Actuaries, shall 
establish--
            (1) the deductible amount for high-deductible coverage for 
        the purposes of section 1103(2) such that the actuarial value 
        of high-deductible coverage described in section 1103 is 20 
        percent less than the actuarial value of standard coverage 
        described in section 1102(a); and
            (2) model benefit packages that may be treated, for 
        purposes of this title, as meeting the requirements for 
        standard or high-deductible coverage under sections 1102(a) and 
        1103, respectively, and which shall include model cost sharing 
        arrangements for fee-for-service options, managed care options, 
        and point-of-service options.

SEC. 1105. LIMITATION ON OFFERING SUPPLEMENTAL BENEFITS.

    A carrier or group health plan offering qualified health coverage 
may offer coverage of items and services only in addition to the 
qualified standard coverage offered (whether in the form of coverage of 
additional items and services or a reduction in cost sharing) and only 
if--
            (1) such supplemental coverage is offered and priced 
        separately from the standard coverage offered and is only made 
        available to individuals who obtain qualified standard coverage 
        through the carrier or plan;
            (2) the purchase of the qualified health coverage is not 
        conditioned upon the purchase of such supplemental coverage; 
        and
            (3) in the case of supplemental coverage that consists of a 
        reduction in the cost-sharing otherwise applicable, the premium 
        for the supplemental coverage takes into account any expected 
        increase in utilization of items and services included in the 
        qualified health coverage resulting from obtaining the 
        supplemental coverage.

SEC. 1106. FAMILY COVERAGE OPTION; SUPPLEMENTAL COVERAGE.

    (a) Family Coverage Option.--Each carrier and group health plan 
that offers health insurance coverage shall provide for an option under 
which children under 26 years of age (without regard to whether they 
are full-time students or disabled) will be treated (with respect to 
family coverage) as family members. The carrier or plan may impose an 
additional premium for such option.
    (b) Construction.--Nothing in this title shall be construed as 
limiting the benefits that may be offered as part of a group health 
plan or health insurance coverage.

SEC. 1107. LEVEL PLAYING FIELD FOR PROVIDERS.

    (a) In General.--Nothing in this subtitle may be construed to 
require or prohibit the use of a particular
 class of provider, among the providers that are legally authorized to 
provide such treatment.
    (b) Coverage of Certain Other Providers.--
            (1) In general.--For purposes of this subtitle, benefits 
        under standard coverage shall include the following:
                    (A) Coverage provided at an individual's home by a 
                Christian Science practitioner or Christian Science 
                nurse.
                    (B) Coverage provided in a Christian Science 
                Sanitorium (as defined in section 1861(y) of the Social 
                Security Act), including coverage provided by a 
                Christian Science practitioner.
            (2) Qualifications of providers.--A Christian Science 
        practitioner or Christian Science nurse is qualified for 
        purposes of paragraph (1) if the practitioner or nurse is 
        listed as such a practitioner or nurse by the First Church of 
        Christ, Scientist, in Boston, Massachusetts.

   Subtitle C--Standards and Certification; Enforcement; Preemption; 
                           General Provisions
                                                    Title I, Subtitle C
SEC. 1201. ESTABLISHMENT OF STANDARDS.

    (a) Role of NAIC.--
            (1) In general.--The Secretary shall request the NAIC to 
        develop, within 9 months after the date of the enactment of 
        this Act, model regulations that specify standards with respect 
        to the requirements of this subtitle as applicable to carriers 
        and health insurance coverage.
            (2) Review of standards.--If the NAIC develops recommended 
        regulations specifying such standards within such period, the 
        Secretary shall review the standards. Such review shall be 
        completed within 60 days after the date the regulations are 
        developed. Unless the Secretary determines within such period 
        that the standards do not meet the requirements, such standards 
        shall serve as the standards under this subtitle, with such 
        amendments as the Secretary deems necessary.
    (b) Contingency.--If the NAIC does not develop such model 
regulations within such period or the Secretary determines that such 
regulations do not specify standards that meet the requirements 
described in subsection (a), the Secretary shall specify, within 15 
months after the date of the enactment of this Act, standards to carry 
out those requirements.

SEC. 1202. APPLICATION OF STANDARDS TO CARRIERS THROUGH STATES.

    (a) Application of Standards.--
            (1) In general.--Each State shall submit to the Secretary, 
        by the deadline specified in paragraph (2), a report on steps 
        the State is taking to implement and enforce the standards 
        established under section 1201 with respect to carriers and 
        health insurance coverage offered or renewed not later than 
        such deadline.
            (2) Deadline for report.--The deadline under this paragraph 
        is 1 year after the date the standards are established under 
        section 1201.
    (b) Federal Role.--
            (1) Notice of deficiency.--If the Secretary determines that 
        a State has failed to submit a report by the deadline specified 
        under subsection (a)(2) or finds that the State has not 
        implemented and provided adequate enforcement of the standards 
        established under section 1201, the Secretary shall notify the 
        State and provide the State a period of 60 days in which to 
        submit such report or to implement and enforce such standards.
            (2) Implementation of alternative.--
                    (A) In general.--If, after such 60-day period, the 
                Secretary finds that such a failure has not been 
                corrected, the Secretary shall provide for such 
                mechanism for the implementation and enforcement of 
                such standards in the State as the Secretary determines 
                to be appropriate.
                    (B) Effective period.--Such implementation and 
                enforcement shall take effect with respect to carriers, 
                and health insurance coverage offered or renewed, on or 
                after 3 months after the date of the Secretary's 
                finding under subparagraph (A), and until the date the 
                Secretary finds that such a failure has been corrected.

SEC. 1203. APPLICATION TO GROUP HEALTH PLANS.

    (a) In General.--Subject to subsection (b), sections 1201 and 1202 
shall apply to group health plans providing health coverage in the same 
manner as they apply to carriers providing health insurance coverage.
    (b) Substitution of References.--For purposes of subsection (a), 
any reference in section 1201 or 1202 to--
            (1) a State or the Secretary of Health and Human Services 
        is deemed a reference to the Secretary of Labor, and
            (2) a carrier or health insurance coverage is deemed a 
        reference to a group health plan and health coverage, 
        respectively.

SEC. 1204. ENFORCEMENT.

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

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

    ``(a) Imposition of Tax.--
            ``(1) In general.--There is hereby imposed a tax on the 
        failure of a carrier to comply with the requirements applicable 
        to the carrier under parts 1 through 4 of subtitle A and 
        subtitle B of title I of the Health Care Improvement Act of 
        1995.
            ``(2) Exception.--Paragraph (1) shall not apply to a 
        failure by a carrier in a State if the Secretary of Health and 
        Human Services determines that the State has in effect a 
        regulatory enforcement mechanism that provides adequate 
        sanctions with respect to such a failure by such a carrier.
    ``(b) Amount of Tax.--
            ``(1) In general.--Subject to paragraph (2), the amount of 
        the tax imposed by subsection (a) shall be $100 for each day 
        during which such failure persists for each individual to which 
        such failure relates. A rule similar to the rule of section 
        4980B(b)(3) shall apply for purposes of this section.
            ``(2) Limitation.--The amount of the tax imposed by 
        subsection (a) for a carrier with respect to health insurance 
        coverage shall not exceed 25 percent of the amounts received 
        for such coverage during the period such failure persists.
    ``(c) Liability for Tax.--The tax imposed by this section shall be 
paid by the carrier.
    ``(d) Exceptions.--
            ``(1) Corrections within 30 days.--No tax shall be imposed 
        by subsection (a) by reason of any failure if--
                    ``(A) such failure was due to reasonable cause and 
                not to willful neglect, and
                    ``(B) such failure is corrected within the 30-day 
                period beginning on the earliest date the carrier knew, 
                or exercising reasonable diligence would have known, 
                that such failure existed.
            ``(2) Waiver by secretary.--In the case of a failure which 
        is due to reasonable cause and not to willful neglect, the 
        Secretary may waive part or all of the tax imposed by 
        subsection (a) to the extent that payment of such tax would be 
        excessive relative to the failure involved.
    ``(e) Definitions.--For purposes of this section, the terms `health 
insurance coverage' and `carrier' have the respective meanings given 
such terms in section 1903 of the Health Care Improvement Act of 
1995.''
            (2) Clerical amendment.--The table of sections for chapter 
        43 of such Code is amended by adding at the end thereof the 
        following new item:


                              ``Sec. 4980C. Failure of carrier to 
                                        comply with health insurance 
                                        standards.''
SEC. 1205. LIMITATION ON SELF INSURANCE FOR SMALL EMPLOYERS.

    A single employer plan (as defined in section 3(40)(B) of the 
Employee Retirement Income Security Act of 1974) may not offer health 
coverage other than through a carrier unless the plan has at least 100 
eligible employees.

              Subtitle D--Definitions; General Provisions
                                                    Title I, Subtitle D
SEC. 1901. GENERAL DEFINITIONS.

    For purposes of this Act:
            (1) Applicable regulatory authority.--The term ``applicable 
        regulatory authority'' means, with respect to a carrier 
        operating in a State--
                    (A) the State insurance commissioner, or
                    (B) the Secretary, in the case described in section 
                1202(b)(2).
            (2) Family member.--
                    (A) In general.--Individuals are considered to be 
                members of a family if--
                            (i) they are married, or
                            (ii) they have a legal parent-to-child 
                        relationship (whether by natural birth or 
                        adoption), if the child is--
                                    (I) under 19 years of age,
                                    (II) under 25 years of age and a 
                                full-time student, or
                                    (III) an unmarried dependent 
                                regardless of age who is incapable of 
                                self-support because of mental or 
                                physical disability which existed 
                                before age 22.
                    (B) Special rules.--Family members--
                            (i) include an adopted child and a 
                        recognized natural child;
                            (ii) include a stepchild or foster child 
                        with respect to an individual but only if the 
                        child lives with the individual in a regular 
                        parent-child relationship; and
                            (iii) include such other children as the 
                        Secretary may specify, but shall not include an 
                        emancipated minor.
            (3) Prisoner.--The term ``prisoner'' means, as specified by 
        the Secretary, an individual during a period of imprisonment 
        under Federal, State, or local authority after conviction as an 
        adult.
            (4) Secretary.--The term ``Secretary'' means the Secretary 
        of Health and Human Services.
            (5) State.--The term ``State'' means the 50 States, the 
        District of Columbia, Puerto Rico, the Virgin Islands, Guam, 
        American Samoa, and the Northern Mariana Islands.

SEC. 1902. DEFINITIONS RELATING TO EMPLOYMENT.

    (a) Application of ERISA Definitions.--Except as otherwise provided 
in this Act, terms used in this Act shall have the meanings applicable 
to such terms under section 3 of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1002).
    (b) Additional Definitions.--For purposes of this title:
            (1) Countable employee.--The term ``countable employee'' 
        means, with respect to an employer for a month, any employee 
        other than an employee whose normal work week is less than 10 
        hours.
            (2) Large employer.--The term ``large employer'' means an 
        employer that is not a small employer (as defined in paragraph 
        (4)).
            (3) Qualifying employee.--
                    (A) In general.--The term ``qualifying employee'' 
                means, with respect to an employer for a month, any 
                employee other than--
                            (i) a part-time, seasonal, or temporary 
                        employee (as defined in subparagraph (B)); or
                            (ii) an employee who is a child described 
                        in section 1901(2)(A)(ii).
                    (B) Part-time, seasonal, or temporary employee 
                defined.--For purposes of subparagraph (A), the term 
                ``part-time, seasonal, or temporary employee'' means 
                any of the following employees with respect to a month:
                            (i) Certain part-time employees.--Any 
                        employee whose normal work week is reasonably 
                        expected as of the first day of such month to 
                        be less than 20 hours.
                            (ii) Seasonal or temporary employees.--Any 
                        employee who is not reasonably expected as of 
                        the first day of such month to be employed by 
                        the employer for a period of 120 consecutive 
                        days during any 365-day period that includes 
                        such first day.
                            (iii) Delay for certain part-time 
                        employees.--Any employee whose normal work week 
                        is reasonably expected as of the first day of 
                        such month to be at least 20 hours, but less 
                        than 35 hours, and the normal work week of the 
                        employee during the preceding 3 months was less 
                        than 20 hours.
            (4) Small employer.--The term ``small employer'' means, 
        with respect to a calendar year, an employer that normally 
        employs more than 1 but less than 100 countable employees on a 
        typical business day. For the purposes of this paragraph, the 
        term ``employee'' includes a self-employed individual. For 
        purposes of determining if an employer is a small employer, 
        rules similar to the rules of subsection (b) and (c) of section 
        414 of the Internal Revenue Code of 1986 shall apply.

SEC. 1903. DEFINITIONS RELATING TO HEALTH COVERAGE, PLANS, AND 
              CARRIERS.

    Except as otherwise provided, for purposes of this Act:
            (1) Benchmark coverage.--The term ``benchmark coverage'' 
        means the standard option of the Blue Cross-Blue Shield plan 
        offered under the Federal Employees Health Benefits Program 
        under chapter 89 of title 5, United States Code, as in effect 
        during 1994.
            (2) Carrier.--The term ``carrier'' means a licensed 
        insurance company, an entity offering prepaid hospital or 
        medical services, and a health maintenance organization, and 
        includes a similar organization regulated under State law for 
        solvency.
            (3) Class of family coverage.--The term ``class of family 
        coverage'' means the 4 classes described in section 1021(a)(3).
            (4) Fair rating area.--The term ``fair rating area'' means 
        a geographic area identified by a State for purposes of section 
        1021(a)(2).
            (5) Group health plan.--The term ``group health plan'' 
        means an employee welfare benefit plan providing medical care 
        (as defined in section 213(d) of the Internal Revenue Code of 
        1986) to participants or beneficiaries directly or through 
        insurance, reimbursement, or otherwise, but does not include 
        any type of coverage excluded from the definition of a health 
        insurance coverage under paragraph (7)(B).
            (6) Health coverage.--The term ``health coverage'' means 
        health insurance coverage provided by a carrier or medical care 
        provided under a group health plan.
            (7) Health insurance coverage.--
                    (A) In general.--Except as provided in subparagraph 
                (B), the term ``health insurance coverage'' means any 
                hospital or medical service policy or certificate, 
                hospital or medical service plan contract, or health 
                maintenance organization group contract offered by a 
                carrier.
                    (B) Exception.--Such term does not include any of 
                the following (or any combination of the following):
                            (i) Coverage only for accident, dental, 
                        vision, disability income, or long-term care 
                        insurance, or any combination thereof.
                            (ii) Medicare supplemental health 
                        insurance.
                            (iii) Coverage issued as a supplement to 
                        liability insurance.
                            (iv) Liability insurance, including general 
                        liability insurance and automobile liability 
                        insurance.
                            (v) Workers' compensation or similar 
                        insurance.
                            (vi) Automobile medical-payment insurance.
                            (vii) Coverage for a specified disease or 
                        illness.
                            (viii) A hospital or fixed indemnity 
                        policy.
                            (ix) Coverage provided exclusively to 
                        individuals who are not eligible individuals.
            (8) Health maintenance organization.--The term ``health 
        maintenance organization'' includes, as defined in standards 
        established under section 1103, an organization that provides 
        health insurance coverage which meets specified standards and 
        under which health services are offered to be provided on a 
        prepaid, at-risk basis primarily through a defined set of 
        providers.
            (9) Health plan purchasing organization.--The term ``health 
        plan purchasing organization'' means an organization 
        established under subtitle A of title VI.
            (10) Individual/small group market.--The term ``individual/
        small group market'' means the insurance market offered--
                    (A) to individuals seeking health insurance 
                coverage on behalf of themselves (and their dependents) 
                insofar as no employer is seeking such coverage on 
                behalf of the individual, and
                    (B) to small employers seeking health insurance 
                coverage on behalf of their employees (and their 
                dependents),
        regardless of whether or not such coverage is made available 
        directly or through a multiple employer welfare arrangement, 
        association, or otherwise.
            (11) Managed care arrangements.--
                    (A) Managed care arrangement.--The term ``managed 
                care arrangement'' means, with respect to a group 
                health plan or under health insurance coverage, an 
                arrangement under such plan or coverage under which 
                providers agree to provide items and services covered 
                under the arrangement to individuals covered under the 
                plan or who have such coverage.
                    (B) Provider network.--The term ``provider 
                network'' means, with respect to a group health plan or 
                health insurance coverage, providers who have entered 
                into an agreement described in subparagraph (A).
            (12) Multiple employer welfare arrangement.--The term 
        ``multiple employer welfare arrangement'' shall have the 
        meaning applicable under section 3(40) of the Employee 
        Retirement Income Security Act of 1974.
            (13) NAIC.--The term ``NAIC'' means the National 
        Association of Insurance Commissioners.
            (14) Options.--Each of the following is a ``type of 
        coverage option'' in relation to standard coverage:
                    (A) Fee-for-service option.--Standard coverage is 
                considered to provide a ``fee-for-service option'' if, 
                regardless of whether covered individuals may receive 
                benefits through a provider network, benefits with 
                respect to the covered items and services in the 
                coverage are made available for such items and services 
                provided through any lawful provider of such covered 
                items and services and payment is made to such a 
                provider whether or not there is a contractual 
                arrangement between the provider and the carrier or 
                plan.
                    (B) Managed care option.--Standard coverage is 
                considered to provide a ``managed care option'' if 
                benefits with respect to the covered items and services 
                in the coverage are made available exclusively through 
                a provider network, except in the case of emergency 
                services and as otherwise required under law.
                    (C) Point-of-service option.--Standard coverage is 
                considered to provide a ``point-of-service option'' if 
                the benefits with respect to covered items and services 
                in the coverage are made available principally through 
                a managed care arrangement, with the choice of the 
                enrollee to obtain such benefits for items and services 
                provided through any lawful provider of such covered 
                items and services. The coverage may provide for 
                different cost sharing schedules based on whether the 
                items and services are provided through such an 
                arrangement or outside such an arrangement.
            (15) Qualified health coverage.--The term ``qualified 
        health coverage'' has the meaning given such term in section 
        1101.
            (16) Standard coverage.--The term ``standard coverage'' 
        means coverage provided consistent with section 1102(a).
            (17) State commissioner of insurance.--The term ``State 
        commissioner of insurance'' includes a State superintendent of 
        insurance.
SEC. 1904. DEFINITIONS RELATING TO RESIDENCE AND IMMIGRATION STATUS.

    Except as otherwise provided, for purposes of this Act:
            (1) Alien permanently residing in the united states under 
        color of law.--The term ``alien permanently residing in the 
        United States under color of law'' means an alien lawfully 
        admitted for permanent residence (within the meaning of section 
        101(a)(20) of the Immigration and Nationality Act), and 
        includes any of the following (such status not having changed):
                    (A) An alien who is admitted as a refugee under 
                section 207 of the Immigration and Nationality Act.
                    (B) An alien who is granted asylum under section 
                208 of such Act.
                    (C) An alien whose deportation is withheld under 
                section 243(h) of such Act.
                    (D) An alien whose deportation is suspended 
                pursuant to section 244 of such Act.
                    (E) An alien who is granted conditional entry 
                pursuant to section 203(a)(7) of such Act as in effect 
                before April 1, 1980.
                    (F) An alien who is admitted for temporary 
                residence under section 210, 210A, or 245A of such Act.
                    (G) An alien who is within a class of aliens 
                lawfully present in the United States pursuant to any 
                other provision of such Act, if (i) the Attorney 
                General determines that the continued presence of such 
                class of aliens serves a humanitarian or other 
                compelling public interest, and (ii) the Secretary 
                determines that such interest would be further served 
                by treating each such alien within such class as a 
                ``legal permanent resident'' for purposes of this Act 
                or who has been granted extended voluntary departure as 
                a member of a nationality group.
                    (H) 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.
                    (I) An alien within such other classification of 
                permanent resident aliens as the Secretary may 
                establish by regulation.
            (2) Long-term nonimmigrant.--The term ``long-term 
        nonimmigrant'' means a nonimmigrant described in subparagraph 
        (E), (H), (I), (K), (L), (N), (O), (Q), or (R) of section 
        101(a)(15) of the Immigration and Nationality Act.
            (3) Qualifying individual.--The term ``qualifying 
        individual'' means, an individual who is a resident of the 
        United States, who is not a prisoner, and is--
                    (A) a citizen or national of the United States;
                    (B) an alien permanently residing in the United 
                States under color of law (as defined in paragraph 
                (1)); or
                    (C) a long-term nonimmigrant (as defined in 
                paragraph (2)).

SEC. 1905. EFFECTIVE DATES.

    The requirements of this title shall apply with respect to--
            (1) group health plans for plan years beginning on or after 
        January 1, 1997, and
            (2) carriers (with respect to coverage other than under a 
        group health plan) as of January 1, 1997.
           TITLE II--REMOVAL OF FINANCIAL BARRIERS TO ACCESS
    Subtitle A--Tax Deductibility for Individuals and Self-Employed
                                                   Title II, Subtitle A
SEC. 2001. DEDUCTION FOR HEALTH INSURANCE COSTS OF SELF-EMPLOYED 
              INDIVIDUALS INCREASED AND MADE PERMANENT.

    (a) In General.--Paragraph (1) of section 162(l) of the Internal 
Revenue Code of 1986 (relating to special rules for health insurance 
costs of self-employed individuals) is amended by striking ``25 
percent'' and inserting ``the applicable percentage''.
    (b) Deduction Made Permanent; Applicable Percentage.--Paragraph (6) 
of section 162(l) of such Code is amended to read as follows:
            ``(6) Applicable percentage.--For purposes of paragraph 
        (1)--

``In the case of taxable years beginning  The applicable percentage is: 
 in calendar year:                                                      
  1996, 1997, or 1998...................  30 percent                    
  1999..................................  50 percent                    
  2000 or thereafter....................  100 percent.''                
                                                                        

    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1995.

SEC. 2002. DEDUCTION FOR HEALTH INSURANCE COSTS OF INDIVIDUALS WHO ARE 
              NOT SELF-EMPLOYED.

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

``SEC. 220. HEALTH INSURANCE COSTS OF INDIVIDUALS WHO ARE NOT SELF-
              EMPLOYED.

    ``(a) In General.--In the case of an individual who is not a self-
employed individual (as defined in section 401(c)(1)), there shall be 
allowed as a deduction an amount equal to 25 percent of the amount paid 
during the taxable year for insurance which constitutes medical care 
for the taxpayer, his spouse, and dependents.
    ``(b) Coordination With Deduction for Self-employed Individuals.--
The amount which would (but for this paragraph) be allowed as a 
deduction under subsection (a) for the taxable year shall be reduced 
(but not below zero) by the amount (if any) allowed as a deduction 
under section 162(l) for such taxable year.
    ``(c) Other Coverage.--Subsection (a) shall not apply to any 
taxpayer for any calendar month for which the taxpayer is eligible to 
participate in any subsidized health plan maintained by any employer of 
the taxpayer or of the spouse of the taxpayer.
    ``(d) Coordination With Medical Deduction, Etc..--Any amount paid 
by a taxpayer for insurance to which subsection (a) applies shall not 
be taken into account in computing the amount allowable to the taxpayer 
as a deduction under section 213(a).''
    (b) Deduction Allowed Whether or Not Taxpayer Itemizes Other 
Deductions.--Subsection (a) of section 62 of such Code is amended by 
adding at the end the following new paragraph:
            ``(16) Health insurance costs.--The deduction allowed by 
        section 220.''
    (c) Clerical Amendment.--The table of sections for part VII of 
subchapter B of chapter 1 of such Code is amended by striking the last 
item and inserting the following new items:

                              ``Sec. 220. Health insurance costs of 
                                        individuals who are not self-
                                        employed.
                              ``Sec. 221. Cross reference.''
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1995.
SEC. 2003. RESTRICTIONS ON HEALTH BENEFITS PROVIDED THROUGH CAFETERIA 
              PLANS AND FLEXIBLE SPENDING ARRANGEMENTS.

    (a) Flexible Spending Arrangements.--Section 106 of the Internal 
Revenue Code of 1986 (relating to contributions by employer to accident 
and health plans) is amended to read as follows:

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

    ``(a) General Rule.--Except as otherwise provided in this section, 
gross income of an employee does not include employer-provided coverage 
under an accident or health plan.
    ``(b) Inclusion of Certain Benefits Provided Through Flexible 
Spending Arrangements.--Gross income of an employee shall include such 
employer-provided coverage which is provided through a flexible 
spending or similar arrangement if any amount of deductible, copayment, 
coinsurance, or similar cost-sharing may be paid for or reimbursed 
under such arrangement.''
    (b) Cafeteria Plans.--Subsection (f) of section 125 of such Code 
(defining qualified benefits) is amended by adding at the end thereof 
the following new sentence: ``Such term shall not include any benefits 
or coverage under an accident or health plan if any amount of 
deductible, copayment, coinsurance, or similar cost-sharing under such 
a plan, or more than 20 percent of any premium (or comparable amount in 
the case of a plan not provided through insurance) for such a plan, may 
be paid for or reimbursed under the cafeteria plan.''
    (c) Employment Tax Treatment.--
            (1) Social security tax.--
                    (A) Subsection (a) of section 3121 of such Code 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) of such Code 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 of 
        such Code 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 of 
        such Code 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).''
    (d) Effective Date.--The amendments made by this section shall take 
effect on January 1, 1997.
    (e) Transfers From Flexible Spending Arrangements to Medical 
Savings Accounts Permitted During 1997.--A flexible spending 
arrangement for health shall not cease to be treated as such an 
arrangement, and no amount shall be includible in the gross income of 
the employee, solely because amounts not paid out as reimbursements 
under such arrangement during 1996 are contributed to a medical savings 
account (as defined
 in section 7705 of the Internal Revenue Code of 1986) of such employee 
if such contributions are made before April 1, 1997, and such employee 
is an eligible employee (as defined in such section) at the time of the 
contributions.
 Subtitle B--Premium and Cost-Sharing Subsidy Program and Supplemental 
              Benefits Program for Low-Income Individuals
                                                   Title II, Subtitle B
SEC. 2101. STATE PREMIUM AND COST-SHARING SUBSIDY PROGRAMS AND 
              SUPPLEMENTAL BENEFITS PROGRAMS.

    (a) Requirements for Programs.--The Social Security Act is amended 
by adding at the end the following new title:

    ``TITLE XXI--STATE ACUTE CARE BENEFITS PROGRAMS FOR LOW-INCOME 
                              INDIVIDUALS

       ``Part A--State Premium and Cost-Sharing Subsidy Programs

``SEC. 2101. ESTABLISHMENT OF STATE PROGRAMS.

    ``(a) In General.--As a requirement under section 1902(a)(63), 
effective January 1, 1998, each State shall establish and maintain a 
premium and cost-sharing subsidy program (in this title referred to as 
a `State subsidy program') that provides for--
            ``(1) premium assistance described in section 2103 to 
        premium assistance eligible individuals described in section 
        2102(a) in accordance with this part,
            ``(2) cost-sharing assistance described in section 2103 to 
        cost-sharing assistance eligible individuals described in 
        section 2102(b) in accordance with this part, and
            ``(3) State maintenance-of-effort payments in accordance 
        with section 2107.
    ``(b) Availability of Funds.--Each State with a State subsidy 
program approved under this part is entitled, for calendar quarters 
beginning on or after January 1, 1998, to payment under section 2106.
    ``(c) Approval of State Programs.--The Secretary may not approve a 
State subsidy program unless the State has submitted a detailed 
description that specifies the form and manner in which it will carry 
out the program and the Secretary finds that the program meets the 
requirements of this part.
  ``(d) Designation of State Agency.--A State shall designate an 
appropriate State agency to administer the State subsidy program. Such 
agency shall be the same agency as the agency designated to administer 
the State supplemental medical benefits program under part B.

``SEC. 2102. ELIGIBILITY.

    ``(a) Assistance.--
            ``(1) Premium assistance.--Each premium assistance eligible 
        individual (as defined in subsection (b)) is entitled to 
        premium assistance under section 2103(a)(1).
            ``(2) Cost-sharing assistance.--Each cost-sharing 
        assistance eligible individual (as defined in subsection (c)) 
        is entitled to cost-sharing assistance described in section 
        2103(a)(2).
    ``(b) Premium Assistance Eligible Individual Defined.--
            ``(1) In general.--In this title, subject to the succeeding 
        provisions of this section, the term `premium assistance 
        eligible individual' means an individual who has been 
        determined under section 2104 to have family modified adjusted 
        income below 100 percent of the applicable poverty line (as 
        defined in section 2144(2)).
            ``(2) Special rule for children and pregnant women.--In 
        this title, subject to the succeeding provisions of this 
        section, the term `premium assistance eligible individual' 
        includes an individual who is a child under 19 years of age or 
        a pregnant woman and who has been determined under section 2104 
        to have family modified adjusted income below 185 percent of 
        the applicable poverty line.
    ``(c) Cost-Sharing Assistance Eligible Individual Defined.--In this 
title, subject to the succeeding provisions of this section, the term 
`cost-sharing assistance eligible individual' means an individual who 
has been determined under section 2104 to have family modified adjusted 
income below 100 percent of the applicable poverty line.
    ``(d) Exclusion of Certain Individuals.--In this title--
            ``(1) In general.--The terms `premium assistance eligible 
        individual' and `cost-sharing assistance eligible individual' 
        do not include, with respect to a month, any of the following 
        individuals:
                    ``(A) Medicare beneficiary.--An individual who is 
                entitled to benefits under part A or B of title XVIII 
                for the month.
                    ``(B) Inmates.--An individual who as of the first 
                day of the month is an inmate of a public institution 
                (except as a patient of a medical institution).
                    ``(C) Certain aliens.--An alien who is not lawfully 
                admitted for permanent residence or not otherwise 
                permanently residing in the United States under color 
                of law (as defined in paragraph (2)).
                    ``(D) Nonresidents.--An individual who is not 
                residing in any State.
            ``(2) Alien permanently residing in the united states under 
        color of law.--The term `alien permanently residing in the 
        United States under color of law' means an alien lawfully 
        admitted for permanent residence (within the meaning of section 
        101(a)(20) of the Immigration and Nationality Act), and 
        includes any of the following:
                    ``(A) An alien who is admitted as a refugee under 
                section 207 of the Immigration and Nationality Act.
                    ``(B) An alien who is granted asylum under section 
                208 of such Act.
                    ``(C) An alien whose deportation is withheld under 
                section 243(h) of such Act.
                    ``(D) An alien whose deportation is suspended under 
                section 244 of such Act.
                    ``(E) An alien who is granted conditional entry 
                pursuant to section 203(a)(7) of such Act, as in effect 
                before April 1, 1980.
                    ``(F) An alien who is admitted for temporary 
                residence under section 210, 210A, or 245A of such Act.
                    ``(G) 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.
                    ``(H) 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.
    ``(e) Protection of Current Beneficiaries.--
            ``(1) In general.--In this title, the term `premium 
        assistance eligible individual' also includes, with respect to 
        a State as of December 31, 1997, an individual described in 
        paragraph (2) whose eligibility for premium assistance has not 
        terminated under paragraph (3).
            ``(2) Current beneficiaries described.--An individual 
        described in this paragraph is an individual who--
                    ``(A) is not excluded under subsection (d),
                    ``(B) is enrolled to receive medical assistance 
                under the State plan under title XIX (and for which 
                Federal financial participation was available) as of 
                December 31, 1997, and
                    ``(C) would remain enrolled to receive such 
                assistance under the State plan under title XIX but for 
                amendments made by the Health Care Improvement Act of 
                1995.
            ``(3) Limitation.--An individual is a premium assistance 
        eligible individual pursuant to this subsection only until the 
        earlier of--
                    ``(A) June 30, 1998, or
                    ``(B) the first date after December 31, 1997, on 
                which the individual's eligibility for medical 
                assistance under the State plan under title XIX would 
                have been terminated if the amendments made by the 
                Health Care Improvement Act of 1995 had not been 
                enacted.

``SEC. 2103. PREMIUM AND COST-SHARING ASSISTANCE.

    ``(a) In General.--
            ``(1) Premium assistance.--
                    ``(A) In general.--The premium assistance under a 
                State subsidy program shall be in the form of a premium 
                assistance certificate that is in the amount computed 
                under subsection (b) and that may be applied toward 
                qualifying coverage (as defined in subparagraph (B)). A 
                carrier or group health plan providing such coverage 
                that is tendered such a certificate with respect to an 
                individual shall reduce the amount of the premium by 
                the amount of the certificate, except as provided in 
                subsection (c)(1)(C).
                    ``(B) Qualifying coverage defined.--For purposes of 
                this part--
                            ``(i) In general.--Except as provided in 
                        clause (ii), the term `qualifying coverage' 
                        means standard coverage described in section 
                        1102 of the Health Care Improvement Act of 
                        1995.
                            ``(ii) Optional use of high-deductible 
                        coverage.--At the election of a premium 
                        assistance eligible individual, the term 
                        `qualifying coverage' includes high-deductible 
                        coverage described in section 1103 of the 
                        Health Care Improvement Act of 1995 with 
                        respect to an individual, but only if the 
                        individual--
                                    ``(I) is not described in section 
                                2102(a)(2) and has been determined 
                                under section 2104 to have family 
                                modified adjusted income not less than 
                                100 percent of the applicable poverty 
                                line, and
                                    ``(II) demonstrates to the 
                                satisfaction of the State that the 
                                individual meets the requirements of 
                                section 1101(b)(2) of the Health Care 
                                Improvement Act of 1995 (relating to 
                                requirement for available assets).
            ``(2) Cost-sharing assistance.--The cost-sharing assistance 
        under a State subsidy program shall be in the form of a cost-
        sharing assistance certificate (or other means) that may be 
        applied with respect to standard coverage. A carrier providing 
        health insurance coverage or a group health plan that is 
        tendered such a certificate with respect to an individual shall 
        reduce the cost-sharing otherwise imposed with respect to 
        health coverage to amounts that are nominal (as specified by 
        the State, consistent with the regulations established to carry 
        out section 1916(a)(3)) and shall not impose any cost-sharing 
        in the case of preventive benefits described in section 
        1102(b)(4) of the Health Care Improvement Act of 1995.
            ``(3) Consolidated and electronic certificates.--Nothing in 
        this section shall be construed as preventing a State from--
                    ``(A) in the case of an individual who is both a 
                premium assistance eligible individual and a cost-
                sharing assistance eligible individual, from 
                consolidating the premium and cost-sharing certificates 
                of the individual, and
                    ``(B) providing premium and cost-sharing assistance 
                certificates through electronic or other means.
    ``(b) Amount of Premium Assistance.--
            ``(1) Amount of assistance.--
                    ``(A) In general.--Subject to subparagraph (B), the 
                amount of premium assistance under this subsection for 
                a month for an individual is the lesser of--
                            ``(i) the premium assistance reference 
                        amount determined under paragraph (2), or
                            ``(ii) the amount of the monthly premium 
                        for the qualifying coverage provided to the 
                        individual.
                    ``(B) Taking into account employer contributions.--
                If an employer is making a contribution for the health 
                coverage of a premium assistance eligible individual, 
                the amount of the premium assistance under this 
                subsection for a month shall not exceed the amount by 
                which the premium amount described in subparagraph 
                (A)(ii) exceeds the amount of the employer 
                contribution.
            ``(2) Premium assistance reference amount determined.--
                    ``(A) In general.--Subject to paragraph (4), the 
                premium assistance reference amount determined under 
                this paragraph is an amount equal to \1/12\ of the 
                weighted average annual premium (determined in 
                accordance with subparagraph (B)) for the individual's 
                family class of enrollment for qualified standard 
                health coverage offered in the fair rating area (as 
                defined in section 1903 of the Health Care Improvement 
                Act of 1995) in the individual/small group market in 
                which the individual resides.
                    ``(B) Determination of weighted average annual 
                premium.--For purposes of subparagraph (A), the 
                weighted average annual premium for a family class of 
                enrollment for qualified standard health coverage shall 
                be based on the number of families (or individuals in 
                the case of the individual class of enrollment) so 
                covered in the class and area involved.
                    ``(C) Family class of enrollment.--In this 
                paragraph, the term `family class of enrollment' means 
                a class of enrollment described in section 1021(a)(3) 
                of the Health Care Improvement Act of 1995.
    ``(c) Payments of Assistance.--
            ``(1) Premium assistance.--
                    ``(A) In general.--The State issuing a premium 
                assistance certificate shall, upon tender to the State 
                of such certificate by the carrier or group health plan 
                providing qualifying coverage, pay the carrier or plan 
                the amount of the certificate.
                    ``(B) Timing of payments.--Payments under this 
                paragraph shall commence in the first month during 
                which the individual obtains qualifying coverage and is 
                determined under section 2104 to be a premium 
                assistance eligible individual.
                    ``(C) Treatment of surpluses and deficits.--
                            ``(i) Deficit.--If the premium for coverage 
                        is greater than the amount of the premium 
                        assistance for an individual, the individual is 
                        responsible for payment of any difference.
                            ``(ii) Surplus.--If the premium for 
                        coverage is less than the amount of the premium 
                        assistance for an individual, the difference 
                        shall not be paid to the individual or the 
                        carrier or plan but shall revert to the Federal 
                        Government.
            ``(2) Cost-sharing assistance.
                    ``(A) In general.--The State issuing a cost-sharing 
                assistance certificate shall, upon presentation to the 
                State of evidence of such certificate by the carrier or 
                group health plan providing coverage and evidence of 
                cost-sharing amounts otherwise incurred for which a 
                reduction in cost-sharing is available under the 
                certificate, pay the carrier or plan the amount of the 
                reduction in cost-sharing in relation to standard 
                coverage.
                    ``(B) Timing of payments.--Payments under this 
                paragraph shall be provided at the time an individual 
                has obtained qualified standard health coverage, is 
                determined under section 2104 to be a cost-sharing 
                assistance eligible individual, and has incurred health 
                care expenses of the type for which a cost-sharing 
                reduction is available under subparagraph (A).
            ``(3) Administrative errors.--A State is financially 
        responsible for premium or cost-sharing 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. 2104. ELIGIBILITY DETERMINATIONS.

    ``(a) In General.--The Secretary shall promulgate regulations 
specifying requirements for State subsidy programs 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.
            ``(2) Application form.--A State program shall provide for 
        the use of an application form developed by the Secretary under 
        subsection (c)(2).
            ``(3) Distribution of applications.--A State program shall 
        distribute applications for assistance widely, including to 
        employers, health plan purchasing organizations, brokers for 
        health coverage, and appropriate public agencies.
            ``(4) Convenient location to submit applications.--A State 
        program shall provide convenient locations for premium and 
        cost-sharing assistance eligible individuals to apply for 
        premium and cost-sharing assistance.
            ``(5) 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, and changes in eligibility status described in 
        section 2002(c) during the year. The State shall revise the 
        amount of any premium and cost-sharing assistance based on such 
        a revised application.
            ``(6) AFDC and ssi applicants.--A State program shall 
        include a procedure under which individuals applying for 
        benefits under part A of title IV or title XVI 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 Program.--
            ``(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 standards, 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 assistance 
                eligible individual including a declaration of 
                estimated family income by the individual; 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 and Cost-Sharing 
Assistance.--A determination by a State that an individual is a premium 
or cost-sharing assistance eligible individual shall be effective for 
the calendar year for which such determination is made unless a revised 
application submitted under subsection (b)(5) indicates that an 
individual is no longer eligible for premium or cost-sharing 
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 and cost-sharing 
        assistance received by an 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 and cost-sharing assistance provided 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. 2105. 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 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 excess amount shall be 
        treated as an underpayment of a tax imposed by chapter 1 of the 
        Internal Revenue Code of 1986.
            ``(3) Underpayment of assistance.--If the total amount of 
        the premium assistance provided was less than the amount 
        computed under paragraph (1), the amount of the difference 
        shall be treated as an overpayment of tax imposed by such 
        chapter, or in the event the taxpayer involved is entitled to a 
        refund of such a tax, subject to the provisions of section 
        6402(d) of such Code.
    ``(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 2104(e) for a 
misrepresentation of material fact described in such section.
    ``(f) No Reconciliation for Cost-Sharing Assistance.--No 
reconciliation statement is required under this section with respect to 
cost-sharing assistance.

``SEC. 2106. PAYMENTS TO STATES.

    ``(a) Payments for Premium and Cost-sharing Assistance.--Subject to 
subsection (b), the Secretary shall provide for payment to each State 
operating a State subsidy program in an amount equal to the sum of--
            ``(1) the Federal title XXI matching percentage (specified 
        under section 2107(a)) of the amount expended by the State 
        under the program during the quarter for premium assistance on 
        behalf of premium assistance eligible individuals and for cost-
        sharing assistance on behalf of cost-sharing assistance 
        eligible individuals; plus
            ``(2) 50 percent of the amounts expended by the State 
        during the quarter as found necessary by the Secretary for the 
        proper and efficient administration of such program in the 
        State.
    ``(b) Limitation on Payments.--
            ``(1) In general.--The total amount of payments that may be 
        made to a State under subsection (a)(1) for all quarters in a 
        calendar year may not exceed the lesser of--
                    ``(A) subject to paragraph (3), the product of--
                            ``(i) the per capita core benefit Federal 
                        payment limit applicable to the calendar year 
                        under subsection (c), and
                            ``(ii) the average monthly number of 
                        premium assistance eligible individuals in the 
                        State in the year; or
                    ``(B) 110 percent of the total amount that would 
                otherwise have been paid to the State under title XIX 
                in the year with respect to medical assistance 
                described in section 1903(i)(16).
            ``(2) Estimations and adjustments.--The Secretary shall--
                    ``(A) establish a process for estimating the limit 
                established under this subsection for a year at the 
                beginning of the year and adjusting such amount during 
                such year; and
                    ``(B) notifying each State of the estimations and 
                adjustments referred to in subparagraph (A).
            ``(3) Adjustment for certain states.--In the case of a 
        State in a year in which the product described in paragraph 
        (1)(A) (as adjusted under this paragraph) exceeds the amount 
        described in paragraph (1)(B), the amount described in 
        paragraph (1)(A) shall be increased by a proportion equal to 
        the ratio of--
                    ``(A) the total amount of the reductions in payment 
                made by the application of paragraph (1)(B) in the 
                year, to
                    ``(B) the total of the limitations in payment for 
                all such States in the year under paragraph (1)(A), 
                determined without regard to any adjustment under this 
                paragraph.
    ``(c) Per Capita Core Benefit Federal Payment Limit Defined.--
            ``(1) In general.--For purposes of subsection (b)(1)(A), 
        the `per capita core benefit Federal payment limit' for a State 
        for a year is equal to the base per capita core Federal 
        payments (described in paragraph (2)) increased by the FEHBP 
        State rolling increase percentage (as defined in subsection 
        (d)(2)) for each year after 1995 and up to the year involved.
            ``(2) Base per capita core federal payments.--For purposes 
        of paragraph (1), the `base per capita core Federal payments' 
        described in this paragraph, for a State, is--
                    ``(A) the baseline Federal medicaid core benefit 
                expenditures (as defined in paragraph (3)) for the 
                State, divided by
                    ``(B) the number of AFDC recipients, SSI 
                recipients, and non-cash medicaid beneficiaries (as 
                described in section 1931(a)(2)) enrolled in the State 
                plan under title XIX in 1995, as determined under 
                paragraph (4).
            ``(3) Determination of baseline federal medicaid core 
        payments.--
                    ``(A) In general.--For purposes of paragraph 
                (2)(A), the `baseline Federal medicaid core payments' 
                for a State is the amount of Federal payments made 
                under section 1903(a)(1) with respect to medical 
                assistance furnished for core benefits (as defined in 
                section 1931(b)(1)) for AFDC recipients, SSI 
                recipients, and non-cash medicaid beneficiaries for all 
                calendar quarters in 1995.
                    ``(B) Disproportionate share payments not 
                included.--In applying subparagraph (A), payments 
                attributable to section 1923 shall not be counted in 
                the amount of payments.
                    ``(C) Treatment of disallowances.--The amount 
                determined under this paragraph shall take into account 
                amounts (or an estimate of amounts) disallowed under 
                title XIX.
            ``(4) Application to particular items and services.--For 
        purposes of this subsection, in determining the per capita core 
        benefit expenditure limit for a category of items and services 
        (within core benefits) furnished in a State, there shall be 
        counted only that proportion of such expenditures (determined 
        only with respect to medical assistance furnished to AFDC 
        recipients, SSI recipients, and non-cash medicaid 
        beneficiaries) that were attributable to items and services 
        included in the core benefits (taking into account any 
        limitation on amount, duration, or scope of items and services 
        included in such benefits).
            ``(5) Determination of number of recipients and 
        beneficiaries.--For purposes of paragraph (2)(B), the number of 
        AFDC recipients, SSI recipients, and non-cash medicaid 
        beneficiaries for a State for 1995 shall be determined based on 
        actual reports submitted by the State to the Secretary. In the 
        case of individuals who were not recipients or beneficiaries 
        for the entire fiscal year, the number shall take into account 
        only the portion of the year in which they were such 
        recipients. The Secretary may audit such reports.
    ``(d) FEHBP National and State Rolling Increase Percentages.--
            ``(1) National increase percentage.--For purposes of this 
        title, the term `FEHBP national rolling increase percentage' 
        means, for a year, the 5-year weighted average of the annual 
        national percentage increase in the premiums for health plans 
        offered under the Federal Employees Health Benefits Program 
        (under chapter 89 of title 5, United States Code) for the 5-
        year period ending with the previous year.
            ``(2) State increase percentage.--For purposes of this 
        title, the term `FEHBP State rolling increase percentage' 
        means, for a year with respect to a State, the 5-year weighted 
        average of the annual percentage increase in the premiums for 
        health plans offered in the State under the Federal Employees 
        Health Benefits Program (under chapter 89 of title 5, United 
        States Code) for the 5-year period ending with the previous 
        year.
            ``(3) Determination.--The increase percentages under 
        paragraphs (1) and (2) shall be determined by the Secretary, in 
        consultation with the Director of Office of Personnel 
        Management, based on the best information available. Such 
        increases shall be adjusted--
                    ``(A) to take into account the age distribution in 
                the Federal workforce (not taking into account 
                individuals 65 years of age or older, employees of the 
                United States Postal Service, retirees, and annuitants) 
                relative to the age distribution in the population of 
                AFDC recipients and non-cash medicaid beneficiaries, 
                and
                    ``(B) to disregard any changes due to changes in 
                the benefit package under the Federal Employees Health 
                Benefits Program after 1994.

``SEC. 2107. FEDERAL TITLE XXI MATCHING PERCENTAGE.

    ``(a) Computation.--
            ``(1) In general.--In this title, except as provided in 
        subsections (c) and (e), the term `Federal title XXI matching 
        percentage' means, for each of the 50 States, 100 percent 
        reduced by the product of the applicable percentage (as defined 
        in paragraph (2)) and the ratio of--
                    ``(A) the total taxable resources ratio (as defined 
                in paragraph (3)) of the State, to--
                    ``(B) the population in poverty ratio (as defined 
                in paragraph (4)) of the State.
            ``(2) Applicable percentage.--For purposes of this section, 
        the term `applicable percentage' means a percentage estimated 
        by the Secretary with the advice of the General Accounting 
        Office that, if it were substituted for the Federal medical 
        assistance percentage for purposes of title XIX with respect to 
        core benefits, would have resulted in an amount of aggregate 
        payments under section 1903(a) for calendar years 1994 through 
        1998 equal to the amount of aggregate payments that would have 
        been made under such section for quarters in such years if such 
        percentage had not been so substituted. The applicable 
        percentage estimated by the Secretary under the previous 
        sentence shall apply with respect to quarters beginning on or 
        after January 1, 1998.
            ``(3) Total table resources ratio defined.--For purposes of 
        this section, the term `total taxable resources ratio' means--
                    ``(A) an amount equal to the most recent 3-year 
                average of the total taxable resources of the State, as 
                determined by the Secretary of the Treasury, divided by
                    ``(B) an amount equal to the sum of the 3-year 
                averages determined under subparagraph (A) for each of 
                the 50 States.
            ``(4) Population in poverty ratio defined.--For purposes of 
        this section, the term `population in poverty ratio' means--
                    ``(A) an amount equal to the 3-year-average of the 
                number of individuals in the State whose family income 
                is below 100 percent of the income official poverty 
                line (as defined by the Office of Management and Budget 
                and revised annually in accordance with section 673(2) 
                of the Omnibus Budget Reconciliation Act of 1981), 
                divided by
                    ``(B) an amount equal to the sum of the averages 
                determined under subparagraph (A) for the 50 States.
    ``(b) Rule for Territories and the District of Columbia.--The 
Federal title XXI matching percentage--
            ``(1) for Puerto Rico, the Virgin Islands, Guam, the 
        Northern Mariana Islands, and American Samoa shall be 40 
        percent, and
            ``(2) for the District of Columbia shall be 50 percent.
    ``(c) Limitation for States.--
            ``(1) In general.--Except as provided in paragraph (2) and 
        subsections (b) and (e), the Federal title XXI matching 
        percentage shall in no case be less than 50 percent or greater 
        than 75 percent.
            ``(2) Treatment of indian facilities.--The Federal title 
        XXI matching percentage shall be 100 percent with respect to 
        amounts expended for premium assistance or cost-sharing 
        assistance or for supplemental acute care benefits with respect 
        to services which are received through an Indian Health Service 
        facility whether operated by the Indian Health Service or by an 
        Indian tribe or tribal organization (as defined in section 4 of 
        the Indian Health Care Improvement Act).
    ``(d) 3 Percent Bonus for Promoting Purchasing Mechanisms.--Except 
in the case described in subsection (c) or in subsection (e), in the 
case of a State that has established and is operating a system of 
health plan purchasing organizations or other mechanism that--
            ``(1) promotes pooling of risk and competition among 
        carriers offering qualified health coverage to residents of the 
        State (including premium subsidy eligible individuals), and
            ``(2) provides information to such consumers about their 
        health plan options,
the Federal title XXI matching percentage otherwise computed (without 
regard to this subsection) shall be increased by 3 percentage points.

       ``Part B--State Supplemental Acute Care Benefits Programs
``SEC. 2121. ESTABLISHMENT OF STATE SUPPLEMENTAL ACUTE CARE BENEFITS 
              PROGRAMS.

    ``(a) In General.--Each State shall establish a State supplemental 
acute care benefits program (each in this part referred to as a `State 
supplemental acute care benefits program') that provides supplemental 
acute care benefits for supplemental benefit eligible individuals.
    ``(b) Availability of Funds.--Each State with a State supplemental 
acute care benefits program approved under this part is entitled, for 
calendar quarters beginning on or after January 1, 1998, to payment 
under section 2124.
    ``(c) Approval of State Programs; Program Descriptions.--The 
Secretary may not approve a State supplemental acute care benefits 
program unless the State has submitted a detailed description of the 
form and manner in which it will carry out the program (consistent with 
the applicable requirements of this part) and the Secretary finds that 
the program meets such applicable requirements.

``SEC. 2122. ELIGIBILITY.

    ``(a) In General.--In this part, the term `supplemental benefit 
eligible individual' means an individual who, as of the time of 
provision of supplemental acute care benefits, is a premium assistance 
eligible individual (as defined in section 2102(a)).
    ``(b) Construction.--Nothing in this part shall be construed to 
create an entitlement for any specific supplemental benefit eligible 
individual.

``SEC. 2123. SCOPE AND PROVISION OF BENEFITS; BENEFITS ADMINISTRATION.

    ``(a) In General.--The supplemental acute care benefits that may be 
made available under a State supplemental acute care benefits program 
may include supplemental acute care benefits (as defined in section 
1931(a)(2)(F)).
    ``(b) Coverage of Benefits.--Each State supplemental acute care 
benefits program--
            ``(1) shall establish methods and standards to select the 
        types, and the amount, duration, and scope, of supplemental 
        acute care benefits included in the program and to assure 
        access to, and the quality of, services included in such 
        benefits;
            ``(2) in providing benefits for supplemental benefit 
        eligible individuals--
                    ``(A) may vary the supplemental acute care benefits 
                provided among reasonable classes of such individuals, 
                and
                    ``(B) may take into account the individual needs of 
                individuals; and
            ``(3) shall coordinate the provision of such benefits with 
        other health insurance coverage and health benefit programs in 
        a manner that avoids duplication of benefits.
    ``(c) Payment Methods.--Benefits under a program may be made 
available in the form of direct provision of services, reimbursement of 
providers, prepayment to providers or health plans on a capitation 
basis, reimbursement of supplemental benefit eligible individuals for 
expenses incurred for supplemental acute care benefits, or a 
combination of these methods.
    ``(d) Administration.--
            ``(1) State agency.--Each State supplemental acute care 
        benefits program shall designate any appropriate State agency 
        to administer the program.
            ``(2) Coordination.--The State supplemental acute care 
        benefits program shall specify how the program--
                    ``(A) will be coordinated with the State medicaid 
                plan, titles V and XX, part A of this title, and any 
                other Federal or State programs that provide services 
                or assistance targeted to supplemental benefit eligible 
                individuals, and
                    ``(B) will be coordinated with qualified health 
                coverage.
    ``(e) Reports and Information to Secretary; Audits.--Each State 
supplemental acute care benefits program shall furnish to the 
Secretary--
            ``(1) such reports, and cooperate with such audits, as the 
        Secretary determines are needed concerning the State's 
        administration of the program under this part, including the 
        processing of any claims under the program, and
            ``(2) such data and information as the Secretary may 
        require in order to carry out the Secretary's responsibilities.

``SEC. 2124. PAYMENTS TO STATES.

    ``(a) In General.--Subject to subsection (b), the Secretary shall 
provide for payment to each State operating an approved State 
supplemental acute care benefits program for a quarter in an amount 
equal to the sum of--
            ``(1) the Federal title XXI matching percentage (specified 
        under section 2107(a)) of the amount expended by the State 
        under the program during the quarter for supplemental acute 
        care benefits for supplemental benefit eligible individuals; 
        and
            ``(2) 50 percent of the amounts expended by the State 
        during the quarter as found necessary by the Secretary for the 
        proper and efficient administration of such program in the 
        State.
    ``(b) Limitation on Payments for Supplemental Acute Care 
Benefits.--
            ``(1) In general.--The total amount of payments that may be 
        made to a State under subsection (a)(1) for all quarters in a 
        calendar year may not exceed the product of--
                    ``(A) the per capita supplemental acute care 
                benefit Federal payment limit applicable to the 
                calendar year under subsection (c), and
                    ``(B) the average monthly number of supplemental 
                benefit eligible individuals in the State in the year.
            ``(2) Estimations and adjustments.--The Secretary shall--
                    ``(A) establish a process for estimating the limit 
                established under this subsection for a year at the 
                beginning of the year and adjusting such amount during 
                such year; and
                    ``(B) notifying each State of the estimations and 
                adjustments referred to in subparagraph (A).
    ``(c) Per Capita Supplemental Acute Care Benefit Federal Payment 
Limit Defined.--
            ``(1) In general.--For purposes of subsection (b)(1)(A), 
        the `per capita supplemental acute care benefit Federal payment 
        limit' for a State for a year is equal to the base per capita 
        supplemental acute care Federal payments (described in 
        paragraph (2)) increased by the FEHBP national rolling increase 
        percentage (as defined in section 2106(d)(1)) for each year 
        after 1995 and up to the year involved.
            ``(2) Base per capita supplemental acute care federal 
        payments.--For purposes of paragraph (1), the `base per capita 
        supplemental acute care Federal payments' described in this 
        paragraph, for a State, is--
                    ``(A) the baseline Federal medicaid supplemental 
                acute care benefit expenditures (as defined in 
                paragraph (3)) for the State, divided by
                    ``(B) the number of AFDC recipients, SSI 
                recipients, and non-cash medicaid beneficiaries (as 
                described in section 1931(a)(2)) enrolled in the State 
                plan under title XIX in 1995, as determined under 
                paragraph (4).
            ``(3) Determination of baseline federal medicaid 
        supplemental acute care payments.--
                    ``(A) In general.--For purposes of paragraph 
                (2)(A), the `baseline Federal medicaid supplemental 
                acute care payments' for a State is the amount of 
                Federal payments made under section 1903(a)(1) with 
                respect to medical assistance furnished for 
                supplemental acute care benefits (as defined in section 
                1931(b)(2)) for AFDC recipients, SSI recipients, and 
                non-cash medicaid beneficiaries for all calendar 
                quarters in 1995.
                    ``(B) Disproportionate share payments not 
                included.--In applying subparagraph (A), payments 
                attributable to section 1923 shall not be counted in 
                the amount of payments.
                    ``(C) Treatment of disallowances.--The amount 
                determined under this paragraph shall take into account 
                amounts (or an estimate of amounts) disallowed under 
                title XIX.
            ``(4) Application to particular items and services.--For 
        purposes of this subsection, in determining the per capita 
        supplemental medical benefit expenditure limit for a category 
        of items and services (within the supplemental acute care 
        benefits) furnished in a State, there shall be counted only 
        that proportion of such expenditures (determined only with 
        respect to medical assistance furnished to AFDC recipients, SSI 
        recipients, and non-cash medicaid beneficiaries) that were 
        attributable to items and services included in the supplemental 
        acute care benefits (taking into account any limitation on 
        amount, duration, or scope of items and services included in 
        such benefits).
            ``(5) Determination of number of recipients and 
        beneficiaries.--For purposes of paragraph (2)(B), the number of 
        AFDC recipients, SSI recipients, and non-cash medicaid 
        beneficiaries for a State for 1995 shall be determined based on 
        actual reports submitted by the State to the Secretary. In the 
        case of individuals who were not recipients or beneficiaries 
        for the entire fiscal year, the number shall take into account 
        only the portion of the year in which they were such 
        recipients. The Secretary may audit such reports.
    ``(d) Supplemental Acute Care Benefit Increase Factor Described.--
For purposes of subsection (b)(1)(C), the `supplemental medical benefit 
increase factor' for a year for a State is equal to the FEHBP national 
rolling increase factor (as defined in section 2107(c)(1)) for the 
year.
    ``(e) Funding.--Payments to States under this section shall be made 
by the Secretary at such time and in such form as provided in 
regulations promulgated by the Secretary, based on the form and manner 
in which payments are made under section 1903.

                      ``Part C--General Provisions

``SEC. 2141. NATURE OF PAYMENT OBLIGATION.

    ``Sections 2106 and 2124 constitute budget authority in advance of 
appropriations Acts, and represent the obligation of the Federal 
Government to provide payments to States under such sections in 
accordance with the applicable provisions of this title.

``SEC. 2142. AUDITS.

    ``The Secretary shall conduct regular audits of the activities 
under the State programs conducted under this title.

``SEC. 2143. DEMONSTRATION PROJECT AUTHORITY.

    ``(a) In General.--In the case of any experimental, pilot, or 
demonstration project which in the judgment of the Secretary is likely 
to assist in promoting the objectives of this title in a State or 
States, the Secretary may waive compliance with any of the requirements 
of this title to the extent and for the period the Secretary finds 
necessary to enable the Secretary to carry out the project.
    ``(b) Restriction.--The Secretary may authorize a waiver under 
subsection (a) only if the Secretary determines that under the waiver--
            ``(1) all individuals who would be premium assistance 
        eligible individuals remain eligible for premium assistance,
            ``(2) benefits under part A are not reduced below the level 
        of benefits otherwise provided, and
            ``(3) the amount of payments made by the Federal Government 
        do not exceed the amount of payments otherwise provided.

``SEC. 2144. DEFINITIONS AND DETERMINATIONS OF INCOME.

    ``For purposes of this title:
            ``(1) 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), 220, 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,
                                    ``(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, and
                                    ``(IV) the amount of any 
                                supplemental security income benefits 
                                provided under title XVI.
                The determination under the preceding sentence shall be 
                made without regard to any carryover or carryback.
                    ``(E) Election with respect to income 
                determination.--As elected by a family at the time of 
                submission of an application for a premium or cost-
                sharing assistance under this part, family income shall 
                be determined either--
                            ``(i) by 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) based upon estimated income for the 
                        entire year in which the application is 
                        submitted.
            ``(2) Applicable poverty line.--The term `applicable 
        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.
            ``(3) Pregnant woman.--The term `pregnant woman' includes a 
        woman during the 60-day period beginning on the last day of the 
        pregnancy.
            ``(4) Premium.--Any reference to the term `premium' 
        includes a reference to premium equivalence for self-insured 
        plans.''.

SEC. 2102. DIVISION OF MEDICAID BENEFITS INTO CORE BENEFITS AND 
              SUPPLEMENTAL BENEFITS FOR AFDC, SSI, AND NON-CASH 
              BENEFICIARIES; LIMITATION ON FEDERAL FINANCIAL 
              PARTICIPATION FOR CORE AND SUPPLEMENTAL BENEFITS.

    (a) In General.--Title XIX of the Social Security Act is amended by 
redesignating section 1931 as section 1932 and by inserting after 
section 1930 the following new section:

``medicaid reform rules for benefits for acute medical and supplemental 
  services for afdc recipients, ssi recipients, and non-cash medicaid 
                             beneficiaries

    ``Sec. 1931. (a) Application of Section.--
            ``(1) In general.--This section applies with respect to 
        medical assistance for acute medical services (as defined in 
        paragraph (2)) under State plans under this title for calendar 
        quarters beginning on or after January 1, 1998, provided to 
        AFDC recipients, SSI recipients, and non-cash medicaid 
        categorical beneficiaries. To the extent this section applies, 
        it supersedes any contrary provision of this title or of other 
        applicable law.
            ``(2) Definitions.--In this section:
                    ``(A) Acute medical services.--The term `acute 
                medical services' means items and services described in 
                section 1905(a) other than the following:
                            ``(i) Nursing facility services (as defined 
                        in section 1905(f)).
                            ``(ii) Intermediate care facility for the 
                        mentally retarded services (as defined in 
                        section 1905(d)).
                            ``(iii) Personal care services (as 
                        described in section 1905(a)(24)).
                            ``(iv) Private duty nursing services (as 
                        referred to in section 1905(a)(8)).
                            ``(v) Home or community-based services 
                        furnished under a waiver granted under 
                        subsection (c), (d), or (e) of section 1915.
                            ``(vi) Home and community care furnished to 
                        functionally disabled elderly individuals under 
                        section 1929.
                            ``(vii) Community supported living 
                        arrangements services under section 1930.
                            ``(viii) Case-management services (as 
                        described in section 1915(g)(2)).
                            ``(ix) Home health care services (as 
                        referred to in section 1905(a)(7)), 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 a 
                        previous clause.
                            ``(x) Hospice care.
                    ``(B) AFDC recipient.--The term `AFDC recipient' 
                means, for a month, an individual who is receiving aid 
                or assistance under any plan of the State approved 
                under title I, X, XIV, or XVI, or part A or part E of 
                title IV for the month.
                    ``(C) Core benefits.--The term `core benefits' 
                means benefits with respect to acute medical services 
                which the Secretary identifies under subsection (b)(1) 
                as typically included in the services covered under 
                benchmark coverage (as defined in section 1903(1) of 
                the Health Care Improvement Act of 1995).
                    ``(D) Non-cash medicaid beneficiary.--The term 
                `non-cash medicaid beneficiary' means an individual 
                described in section 1902(a)(10)(A) who is not an AFDC 
                recipient or a SSI recipient.
                    ``(E) SSI recipient.--The term `SSI recipient' 
                means, for a month, an individual--
                            ``(i) with respect to whom supplemental 
                        security income benefits are being paid under 
                        title XVI for the month,
                            ``(ii) who is receiving a supplementary 
                        payment under section 1616 or under section 212 
                        of Public Law 93-66 for the month,
                            ``(iii) who is receiving monthly benefits 
                        under section 1619(a) (whether or not pursuant 
                        to section 1616(c)(3)) for the month, or
                            ``(iv) who is treated under section 1619(b) 
                        as receiving supplemental security income 
                        benefits in a month for purposes of title XIX.
                    ``(F) Supplemental acute care benefits.--The term 
                `supplemental acute care benefits' means benefits for 
                acute medical services which are not--
                            ``(i) core benefits, and
                            ``(ii) benefits for items or services 
                        described in clauses (i) through (x) of 
                        subparagraph (A).
    ``(b) Division of Acute Medical Service Benefits Into Core Benefits 
and Supplemental Acute Care Benefits.--The Secretary shall divide the 
class of benefits for acute medical services into the following benefit 
groups:
            ``(1) Core benefits.--A group of benefits consisting of 
        core benefits (as defined in subsection (a)(2)(C)).
            ``(2) Supplemental acute care benefits.--A group of 
        benefits consisting of supplemental acute care benefits (as 
        defined in subsection (a)(2)(F)).
    ``(c) Limitation on Amount of Federal Financial Participation for 
Benefits for Acute Medical Services for AFDC Recipients, SSI 
Recipients, and Non-Cash Medicaid Beneficiaries.--With respect to 
expenditures for medical assistance for acute medical services benefits 
for AFDC recipients, SSI recipients, and non-cash medicaid 
beneficiaries who are not entitled to benefits under part A of title 
XVIII in a State for quarters in a calendar year after 1998--
            ``(1) no such Federal financial participation shall be 
        payable under section 1903(a)(1), and
            ``(2) such a recipient or beneficiary is not entitled to 
        receive any medical assistance for such benefits under the 
        State plan under this title.
    ``(d) Elimination of Entitlement for Supplemental Acute Care 
Benefits.--With respect to medical assistance for supplemental acute 
care benefits for AFDC recipients and non-cash medicaid beneficiaries 
who are not entitled to benefits under part A of title XVIII in a State 
for quarters in 1998 or any succeeding year--
            ``(1) no Federal financial participation shall be payable 
        under section 1903(a)(1),
            ``(2) the State may receive payments for such supplemental 
        acute care benefits under part B of title XXI, and
            ``(3) such a recipient or beneficiary is not entitled to 
        receive any medical assistance for such benefits under the 
        State plan under this title.''.
    (b) Conforming Amendment.--Section 1903(i) of the Social Security 
Act (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:
            ``(16) in accordance with section 1931, with respect to 
        amounts expended for medical assistance for core benefits for 
        AFDC recipients, SSI recipients, and non-cash medicaid 
        beneficiaries who are not entitled to benefits under part A of 
        title XVIII for calendar quarters beginning on or after January 
        1, 1998.''.

SEC. 2103. OPERATION OF PROGRAM AS STATE PLAN REQUIREMENT UNDER 
              MEDICAID.

    (a) In General.--Section 1902(a) of the Social Security Act (42 
U.S.C. 1396a(a)) is amended--
            (1) by striking ``and'' at the end of paragraph (61);
            (2) by striking the period at the end of paragraph (62) and 
        inserting ``; and''; and
            (3) by inserting after paragraph (62) the following new 
        paragraph:
            ``(63) provide for a State program furnishing premium 
        subsidies for low-income individuals in accordance with part A 
        of title XXI.''.
    (b) Effective Date.--The requirement of section 1902(a)(63) of the 
Social Security Act (as added by subsection (a)) shall apply to Federal 
financial participation for calendar quarters beginning on or after 
January 1, 1998.

SEC. 2104. APPLICATION OF MISCELLANEOUS PROVISIONS.

    (a) Application of SAVE Provisions.--Section 1137(b) of the Social 
Security Act (42 U.S.C. 1320b-7(b)) is amended--
            (1) by striking ``and'' at the end of paragraph (4),
            (2) by striking the period at the end of paragraph (5) and 
        inserting ``; and'', and
            (3) by adding at the end the following:
            ``(6) a State subsidy program under part A of title XXI.''.
    (b) Disclosure of Certain Information.
            (1) In general.--Subsection (l) of section 6103 of the 
        Internal Revenue Code of 1986 is amended by adding at the end 
        the following new paragraph:
            ``(15) Disclosure of return information to carry out health 
        premium assistance certificate program.--The Secretary shall, 
        upon written request from a State, disclose to officials of the 
        State return information for purposes of determining or 
        verifying whether any individual is entitled to a premium 
        assistance certificate under part A of title XXI of the Social 
        Security Act and the amount thereof. Return information 
        disclosed under this paragraph may be used by such officers and 
        employees only for the purposes of, and to the extent necessary 
        in, making such determination or verification.''.
            (2) Conforming change.--Paragraph (4) of section 6103(p) of 
        such Code is amended by striking ``or (14)'' each place it 
        appears and inserting ``(14) or (15)''.
    (c) Application of Definition of State.--Section 1001(a)(1) of the 
Social Security Act (42 U.S.C. 1301(a)(1)) is amended by striking 
``title XX'' and inserting ``titles XX and XXI''.
    (d) Construction.--Nothing in this title shall be construed as 
preventing the Secretary of Health and Human Services from continuing 
in effect waivers (in effect as of the date of the enactment of this 
Act) of requirements under title XIX of the Social Security Act.
                     TITLE III--ACCESS IMPROVEMENTS

               Subtitle A--Improved Access in Rural Areas
                                                  Title III, Subtitle A
      PART 1--GRANTS TO ENCOURAGE COMMUNITY RURAL HEALTH NETWORKS

SEC. 3001. ASSISTANCE FOR DEVELOPMENT OF ACCESS PLANS FOR CHRONICALLY 
              UNDERSERVED AREAS.

    (a) Availability of Financial Assistance To Implement Action Plans 
To Increase Access.--
            (1) In general.--The Secretary shall provide grants (in 
        amounts determined in accordance with paragraph (3)) over a 3-
        year period to an eligible State for the development of plans 
        to increase access to health care services during such period 
        for residents of areas in the State that are designated as 
        chronically underserved areas in accordance with subsection 
        (b).
            (2) Eligibility requirements.--A State is eligible to 
        receive grants under this section if the State submits to the 
        Secretary (at such time and in such form as the Secretary may 
        require) assurances that the State has developed (or is in the 
        process of developing) a plan to increase the access of 
        residents of a chronically underserved area to health care 
        services that meets the requirements of subsection (c), 
        together with such other information and assurances as the 
        Secretary may require.
            (3) Amount of assistance.--
                    (A) In general.--Subject to subparagraph (B), the 
                amount of assistance provided to a State under this 
                subsection with respect to any plan during a 3-year 
                period shall be equal to--
                            (i) for the first year of the period, an 
                        amount equal to 100 percent of the amounts 
                        expended by the State during the year to 
                        implement the plan described in paragraph (1) 
                        (as reported to the Secretary in accordance 
                        with such requirements as the Secretary may 
                        impose);
                            (ii) for the second year of the period, an 
                        amount equal to 50 percent of the amounts 
                        expended by the State during the year to 
                        implement the plan; and
                            (iii) for the third year of the period, an 
                        amount equal to 33 percent of the amounts 
                        expended by the State during the year to 
                        implement the plan.
                    (B) Aggregate per plan limit.--The amount of 
                assistance provided to a State under this subsection 
                with respect to any plan may not exceed $100,000 during 
                any year of the 3-year period for which the State 
                receives assistance.
    (b) Designation of Areas.--
            (1) Designation by governor.--In accordance with the 
        guidelines developed under paragraph (2), the Governor of a 
        State may designate an area in the State as a chronically 
        underserved area for purposes of this section upon the request 
        of a local official of the area or upon the Governor's 
        initiative.
            (2) Guidelines for designation.--
                    (A) Development by secretary.--Not later than 1 
                year after the date of the enactment of this Act, the 
                Secretary shall develop guidelines for the designation 
                of areas as chronically underserved areas under this 
                section.
                    (B) Factors considered in development of 
                guidelines.--In developing guidelines under paragraph 
                (1), the Secretary shall consider the following 
                factors:
                            (i) Whether the area (or a significant 
                        portion of the area)--
                                    (I) is designated as a health 
                                professional shortage area (under 
                                section 332(a) of the Public Health 
                                Service Act), or meets the criteria for 
                                designation as such an area; or
                                    (II) was previously designated as 
                                such an area or previously met such 
                                criteria for an extended period prior 
                                to the designation of the area under 
                                this section (in accordance with 
                                criteria established by the Secretary).
                            (ii) The availability and adequacy of 
                        health care providers and facilities for 
                        residents of the area.
                            (iii) The extent to which the availability 
                        of assistance under other Federal and State 
                        programs has failed to alleviate the lack of 
                        access to health care services for residents of 
                        the area.
                            (iv) The percentage of residents of the 
                        area whose income is at or below the poverty 
                        level.
                            (v) The percentage of residents of the area 
                        who are age 65 or older.
                            (vi) The existence of cultural or 
                        geographic barriers to access to health care 
                        services in the area, including weather 
                        conditions.
            (3) Review by secretary.--No designation under paragraph 
        (1) shall take effect under this section unless the Secretary--
                    (A) has been notified of the proposed designation; 
                and
                    (B) has not, within 60 days after the date of 
                receipt of the notice, disapproved the designation.
            (4) Period of designation.--A designation under this 
        section shall be effective during a period specified by the 
        Governor of not longer than 3 years. The Governor may extend 
        the designation for additional 3-year periods, except that a 
        State may not receive assistance under subsection (a)(3) for 
        amounts expended during any such additional periods.
    (c) Requirements for State Access Plans.--A State plan to increase 
the access of residents of chronically underserved areas to health care 
services meets the requirements of this section if the Secretary finds 
that the plan was developed with the participation of health care 
providers and facilities and residents of the area that is the subject 
of the plan, together with such other requirements as the Secretary may 
impose.
    (d) Authorization of Appropriations.--There are authorized to be 
appropriated for assistance under this section $10,000,000 for each of 
the first 3 fiscal years beginning after the date on which the 
Secretary develops guidelines for the designation of areas as 
chronically underserved areas under subsection (b)(2).

SEC. 3002. TECHNICAL ASSISTANCE GRANTS FOR NETWORKS.

    (a) In General.--The Secretary shall make funds available under 
this section to provide technical assistance (including information 
regarding eligibility for other Federal programs) and advice for 
entities described in subsection (b) seeking to establish or enhance a 
community rural health network in an underserved rural area.
    (b) Entities Eligible To Receive Funds.--The following entities are 
eligible to receive funds for technical assistance under this section:
            (1) An entity receiving a grant under section 3003.
            (2) A State or unit of local government.
            (3) An entity providing health care services (including 
        health professional education services) in the area involved.
    (c) Use of Funds.--
            (1) In general.--Funds made available under this section 
        may be used--
                    (A) for planning a community health network and the 
                submission of the plan for the network to the Secretary 
                under section 3003(c) (subject to the limitation 
                described in paragraph (2));
                    (B) to provide assistance in conducting community-
                based needs and prioritization, identifying existing 
                regional health resources, and developing networks, 
                utilizing existing local providers and facilities where 
                appropriate;
                    (C) to provide advice on obtaining the proper 
                balance of primary and secondary facilities for the 
                population served by the network;
                    (D) to provide assistance in coordinating 
                arrangements for tertiary care;
                    (E) to provide assistance in recruitment and 
                retention of health care professionals;
                    (F) to provide assistance in coordinating the 
                delivery of emergency services with the provision of 
                other health care services in the area served by the 
                network;
                    (G) to provide assistance in coordinating 
                arrangements for mental health and substance abuse 
                treatment services; and
                    (H) to provide information regarding the area or 
                proposed network's eligibility for Federal and State 
                assistance for health care-related activities, together 
                with information on funds available through private 
                sources.
            (2) Limitation on amount available for development of 
        network.--The amount of financial assistance available for 
        activities described in paragraph (1) may not exceed $50,000 
        and may not be available for a period of time exceeding 1 year.
    (d) Use of Rural Health Offices.--In carrying out this section with 
respect to entities in rural areas, the Secretary shall make funds 
available through--
            (1) not more than 10 regional centers acting as 
        clearinghouses for the distribution of such funds; and
            (2) State Offices of Rural Health, or any combination of 
        such centers and Offices.
    (e) Authorization of Appropriations.--There are authorized to be 
appropriated $10,000,000 for each of fiscal years 1996 and 1997 and 
$30,000,000 for each of fiscal years 1998 through 2000 to carry out 
this section. Amounts appropriated under this section shall be 
available until expended.

SEC. 3003. DEVELOPMENT GRANTS FOR NETWORKS.

    (a) In General.--The Secretary shall provide financial assistance 
to eligible entities in order to provide for the development and 
implementation of community rural health networks.
    (b) Eligible Entities.--
            (1) In general.--An entity is eligible to receive financial 
        assistance under this section only if the entity--
                    (A) is (i) based in a rural area or (ii) is 
                described in paragraph (2), (3), or (4) of section 
                3002(b),
                    (B) is undertaking to develop and implement a 
                community rural health network in an underserved rural 
                area (or underserved rural areas) with the active 
                participation of at least 3 health care providers or 
                facilities in the area, and
                    (C) has consulted with the local governments of the 
                area to be served by the network and with individuals 
                who reside in the area.
            (2) Coordination with providers outside of area 
        permitted.--Nothing in this section shall be construed as 
        preventing an entity that coordinates the delivery of services 
        in an underserved rural area with an entity outside the area 
        from qualifying for financial assistance under this section, or 
        as preventing an entity consisting of a consortia of members 
        located in adjoining States from qualifying for such 
        assistance.
            (3) Permitting entities not receiving funding for 
        development of plan to receive funding for implementation.--An 
        entity that is eligible to receive financial assistance under 
        this section may receive assistance to carry out activities 
        described in subsection (c)(1)(B) notwithstanding that the 
        entity does not receive assistance to carry out activities 
        described in subsection (c)(1)(A).
    (c) Use of Funds.--
            (1) In general.--Financial assistance made available to 
        eligible entities under this section may be used only--
                    (A) for the development of a community health 
                network and the submission of the plan for the network 
                to the Secretary; and
                    (B) after the Secretary approves the plan for the 
                network, for activities to implement the network, 
                including (but not limited to)--
                            (i) establishing information systems, 
                        including telecommunications,
                            (ii) recruiting health care providers,
                            (iii) providing services to enable 
                        individuals to have access to health care 
                        services, including transportation and language 
                        interpretation services (including 
                        interpretation services for the hearing-
                        impaired), and
                            (iv) establishing and operating a community 
                        health advisor program described in paragraph 
                        (2).
            (2) Community health advisor program.--
                    (A) Program described.--In paragraph (1), a 
                ``community health advisor program'' is a program under 
                which community health advisors carry out the following 
                activities:
                            (i) Collaborating efforts with health care 
                        providers and related entities to facilitate 
                        the provision of health services and health-
                        related social services.
                            (ii) Providing public education on health 
                        promotion and disease prevention and efforts to 
                        facilitate the use of available health services 
                        and health-related social services.
                            (iii) Providing health-related counseling.
                            (iv) Making referrals for available health 
                        services and health-related social services.
                            (v) Improving the ability of individuals to 
                        use health services and health-related social 
                        services under Federal, State, and local 
                        programs through assisting individuals in 
                        establishing eligibility under the programs.
                            (vi) Providing outreach services to inform 
                        the community of the availability of the 
                        services provided under the program.
                    (B) Community health advisor defined.--In 
                subparagraph (A), the term ``community health advisor'' 
                means, with respect to a community health advisor 
                program, an individual--
                            (i) who has demonstrated the capacity to 
                        carry out one or more of the activities carried 
                        out under the program; and
                            (ii) who, for not less than one year, has 
                        been a resident of the community in which the 
                        program is to be operated.
            (3) Limitations on activities funded.--Financial assistance 
        made available under this section may not be used for any of 
        the following:
                    (A) For a telecommunications system unless such 
                system is coordinated with, and does not duplicate, a 
                system existing in the area.
                    (B) For construction or remodeling of health care 
                facilities.
            (4) Limitation on amount available for development of 
        network.--The amount of financial assistance available for 
        activities described in paragraph (1)(A) may not exceed $50,000 
        and may not be made available for a period of time exceeding 1 
        year.
    (d) Application.--
            (1) In general.--No financial assistance shall be provided 
        under this section to an entity unless the entity has submitted 
        to the Secretary, in a time and manner specified by the 
        Secretary, and had approved by the Secretary an application.
            (2) Information to be included.--Each such application 
        shall include--
                    (A) a description of the community rural health 
                network, including service area and capacity, and
                    (B) a description of how the proposed network will 
                utilize existing health care facilities in a manner 
                that avoids unnecessary duplication.
    (e) Authorization of Appropriations.--
            (1) In general.--There are authorized to be appropriated 
        $100,000,000 for each of fiscal years 1996 and 1997, 
        $120,000,000 for fiscal year 1998, $130,000,000 for fiscal year 
        1999, $140,000,000 for fiscal year 2000, $150,000,000 for 
        fiscal year 2001, $160,000,000 for fiscal year 2002, 
        $170,000,000 for fiscal year 2003, and $180,000,000 for fiscal 
        year 2004, to carry out this section. Amounts appropriated 
        under this section shall be available until expended.
            (2) Integration of other authorizations.--In order to 
        provide for the authorization of appropriations under paragraph 
        (1), notwithstanding any other provision of law, no funds are 
        authorized to be appropriated to carry out the following 
        programs in fiscal years after fiscal year 1996:
                    (A) The rural health transition grant program 
                (under section 4005(e) of the Omnibus Budget 
                Reconciliation Act of 1987).
                    (B) The rural health outreach program (for which 
                appropriations were annually provided under the 
                Departments of Labor, Health and Human Services, and 
                Education, and Related Agencies Appropriation Acts).
            (3) Annual limit on assistance to grantee.--The amount of 
        financial assistance provided to an entity under this section 
        during a year may not exceed $250,000.

SEC. 3004. DEFINITIONS.

    For purposes of this part:
            (1) Community rural health network.--The term ``community 
        rural health network'' means a formal cooperative arrangement 
        between participating hospitals, physicians, and other health 
        care providers which--
                    (A) is located in an underserved rural area;
                    (B) furnishes health care services to individuals 
                residing in the area; and
                    (C) is governed by a board of directors selected by 
                participating health care providers and residents of 
                the area.
            (2) Rural area.--The term ``rural area'' has the meaning 
        given such term in section 1886(d)(2)(D) of the Social Security 
        Act.
            (3) Secretary.--The term ``Secretary'' means the Secretary 
        of Health and Human Services.
            (4) State.--The term ``State'' means each of the several 
        States, the District of Columbia, Puerto Rico, the Virgin 
        Islands, Guam, the Northern Mariana Islands, and American 
        Samoa.
            (5) Underserved rural area.--The term ``underserved rural 
        area'' means a rural area designated--
                    (A) as a health professional shortage area under 
                section 332(a) of the Public Health Service Act; or
                    (B) as a chronically underserved area under section 
                3001.
PART 2--INCENTIVES FOR HEALTH PROFESSIONALS TO PRACTICE IN RURAL AREAS 
           THROUGH THE NATIONAL HEALTH SERVICE CORPS PROGRAM

SEC. 3011. NATIONAL HEALTH SERVICE CORPS LOAN REPAYMENTS EXCLUDED FROM 
              GROSS INCOME.

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

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

    ``(a) General Rule.--Gross income shall not include any qualified 
loan repayment.
    ``(b) Qualified Loan Repayment.--For purposes of this section, the 
term `qualified loan repayment' means any payment made on behalf of the 
taxpayer by the National Health Service Corps Loan Repayment Program 
under section 338B(g) of the Public Health Service Act.''.
    (b) Conforming Amendment.--Paragraph (3) of section 338B(g) of the 
Public Health Service Act is amended by striking ``Federal, State, or 
local'' and inserting ``State or local''.
    (c) Clerical Amendment.--The table of sections for part III of 
subchapter B of chapter 1 of the Internal Revenue Code of 1986 is 
amended by striking the item relating to section 137 and inserting the 
following:

                              ``Sec. 137. National Health Service Corps 
                                        loan repayments.
                              ``Sec. 138. Cross-references to other 
                                        Acts.''.

    (d) Effective Date.--The amendments made by this section shall 
apply to payments made under section 338B(g) of the Public Health 
Service Act after the date of the enactment of this Act.

SEC. 3012. MODIFICATION IN CRITERIA FOR DESIGNATION AS HEALTH 
              PROFESSIONAL SHORTAGE AREA.

    (a) Relevance of Travel Times Within Frontier Areas.--Section 
332(a) of the Public Health Service Act (42 U.S.C. 245e(a)) is amended 
by adding at the end the following new paragraph:
            ``(4) With respect to meeting the criteria under paragraph 
        (1)(A) for an area to be designated as a health professional 
        shortage area, the Secretary shall, in the case of a frontier 
        area, make the determination of whether the frontier area is a 
        rational area for the delivery of health services without 
        regard to--
                    ``(A) the travel time between population centers in 
                the frontier area; or
                    ``(B) the travel time to contiguous area resources 
                in the frontier area.''.
    (b) Regulations Defining Health Professional Shortage Areas.--
Within 1 year after the date of the enactment of this Act, the 
Secretary of Health and Human Services shall promulgate regulations 
that define health professional shortage areas for purposes of title 
III of the Public Health Service Act.
    (c) Agency Recommendations for Improvements.--Not later than July 
1, 1996, the Secretary of Health and Human Services shall submit to the 
Congress a report specifying the recommendations of the Secretary for 
improving the manner of determining the extent to which a geographic 
area has a need for assignments of members of the National Health 
Service Corps, and for equitably allocating such assignments among the 
geographic areas with a need for such assignments.
    (d) Effective Date.--This section shall take effect on October 1, 
1995, or upon the date of the enactment of this Act, whichever occurs 
later.

SEC. 3013. OTHER PROVISIONS REGARDING NATIONAL HEALTH SERVICE CORPS.

    (a) Scholarship and Loan Repayment Programs.--
            (1) Authorization of appropriations.--Section 338H(b)(1) of 
        the Public Health Service Act (42 U.S.C. 254q(b)(1)) is 
        amended--
                    (A) by striking ``and'' after ``1991,''; and
                    (B) by striking ``through 2000.'' and inserting 
                ``through 2004.''.
            (2) Allocation for participation of nurses in scholarship 
        program.--Section 338H(b)(2) of the Public Health Service Act 
        (42 U.S.C. 254q(b)(2)) is amended by adding at the end the 
        following subparagraph:
                    ``(C) Of the amounts appropriated under paragraph 
                (1) for fiscal year 1995 and subsequent fiscal years, 
                the Secretary shall reserve such amounts as may be 
                necessary to ensure that, of the aggregate number of 
                individuals who are participants in the Scholarship 
                Program, the total number who are being educated as 
                nurses or are serving as nurses, respectively, is 
                increased to 20 percent.''.
    (b) Increase in Number of Mental Health Professionals in Shortage 
Areas.--
            (1) In general.--Section 338H(b) of the Public Health 
        Service Act (42 U.S.C. 254q(b)) is amended by adding at the end 
        the following paragraph:
            ``(3) Mental health professionals.--In providing contracts 
        under this subpart for scholarships and loan repayments, the 
        Secretary shall ensure that an appropriate number of mental 
        health professionals is assigned under section 333 for health 
        professional shortage areas.''.
            (2) Applicability.--With respect to contracts for 
        scholarships and loan repayments under subpart III of part D of 
        title III of the Public Health Service Act, the amendment made 
        by subsection (a) applies with respect to contracts entered 
        into on or after October 1, 1995.

             PART 3--ASSISTANCE FOR INSTITUTIONAL PROVIDERS

                  Subpart A--Emergency Medical Systems

SEC. 3021. EMERGENCY MEDICAL SERVICES.

    (a) Headings.--Title XII of the Public Health Service Act (42 
U.S.C. 300d et seq.) is amended--
            (1) in the heading for the title, by striking ``TRAUMA 
        CARE'' and inserting ``EMERGENCY MEDICAL AND TRAUMA CARE 
        SERVICES''; and
            (2) in the heading for part A, by striking ``General'' and 
        all that follows and inserting ``General Authorities and 
        Duties''.
    (b) State Offices of Emergency Medical Services; Demonstration 
Program Regarding Telecommunications.--Part A of title XII of the 
Public Health Service Act (42 U.S.C. 300d et seq.), as amended by 
section 601(b) of Public Law 103-183 (107 Stat. 2238), is amended--
            (1) by redesignating sections 1202 and 1203 as sections 
        1203 and 1204, respectively;
            (2) by inserting after section 1201 the following section:

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

    ``(a) Program of Grants.--The Secretary may make grants to States 
for the purpose of improving the availability and quality of emergency 
medical services through the operation of State offices of emergency 
medical services.
    ``(b) Requirement of Matching Funds.--
            ``(1) In general.--The Secretary may not make a grant under 
        subsection (a) unless the State involved agrees, with respect 
        to the costs to be incurred by the State in carrying out the 
        purpose described in such subsection, to provide non-Federal 
        contributions toward such costs in an amount that--
                    ``(A) for the first fiscal year of payments under 
                the grant, is not less than $1 for each $3 of Federal 
                funds provided in the grant;
                    ``(B) for any second fiscal year of such payments, 
                is not less than $1 for each $1 of Federal funds 
                provided in the grant; and
                    ``(C) for any third fiscal year of such payments, 
                is not less than $3 for each $1 of Federal funds 
                provided in the grant.
            ``(2) Determination of amount of non-federal 
        contribution.--
                    ``(A) Subject to subparagraph (B), non-Federal 
                contributions required in paragraph (1) may be in cash 
                or in kind, fairly evaluated, including plant, 
                equipment, or services. Amounts provided by the Federal 
                Government, or services assisted or subsidized to any 
                significant extent by the Federal Government, may not 
                be included in determining the amount of such non-
                Federal contributions.
                    ``(B) The Secretary may not make a grant under 
                subsection (a) unless the State involved agrees that--
                            ``(i) for the first fiscal year of payments 
                        under the grant, 100 percent or less of the 
                        non-Federal contributions required in paragraph 
                        (1) will be provided in the form of in-kind 
                        contributions;
                            ``(ii) for any second fiscal year of such 
                        payments, not more than 50 percent of such non-
                        Federal contributions will be provided in the 
                        form of in-kind contributions; and
                            ``(iii) for any third fiscal year of such 
                        payments, such non-Federal contributions will 
                        be provided solely in the form of cash.
    ``(c) Certain Required Activities.--The Secretary may not make a 
grant under subsection (a) unless the State involved agrees that 
activities carried out by an office operated pursuant to such 
subsection will include--
            ``(1) coordinating the activities carried out in the State 
        that relate to emergency medical services;
            ``(2) activities regarding the matters described in 
        paragraphs (1) through (4) section 1201(a); and
            ``(3) identifying Federal and State programs regarding 
        emergency medical services and providing technical assistance 
        to public and nonprofit private entities regarding 
        participation in such programs.
    ``(d) Requirement Regarding Annual Budget for Office.--The 
Secretary may not make a grant under subsection (a) unless the State 
involved agrees that, for any fiscal year for which the State receives 
such a grant, the office operated pursuant to subsection (a) will be 
provided with an annual budget of not less than $50,000.
    ``(e) Certain Uses of Funds.--
            ``(1) Restrictions.--The Secretary may not make a grant 
        under subsection (a) unless the State involved agrees that--
                    ``(A) if research with respect to emergency medical 
                services is conducted pursuant to the grant, not more 
                than 10 percent of the grant will be expended for such 
                research; and
                    ``(B) the grant will not be expended to provide 
                emergency medical services (including providing cash 
                payments regarding such services).
            ``(2) Establishment of office.--Activities for which a 
        State may expend a grant under subsection (a) include paying 
        the costs of establishing an office of emergency medical 
        services for purposes of such subsection.
    ``(f) Reports.--The Secretary may not make a grant under subsection 
(a) unless the State involved agrees to submit to the Secretary reports 
containing such information as the Secretary may require regarding 
activities carried out under this section by the State.
    ``(g) Requirement of Application.--The Secretary may not make a 
grant under subsection (a) unless an application for the grant is 
submitted to the Secretary and the application is in such form, is made 
in such manner, and contains such agreements, assurances, and 
information as the Secretary determines to be necessary to carry out 
this section.''; and
            (3) in section 1204 (as redesignated by paragraph (1) of 
        this subsection)--
                    (A) by redesignating subsection (c) as subsection 
                (d); and
                    (B) by inserting after subsection (b) the following 
                new subsection:
    ``(c) Demonstration Program Regarding Telecommunications.--
            ``(1) Linkages for rural facilities.--Projects under 
        subsection (a)(1) shall include demonstration projects to 
        establish telecommunications between rural medical facilities 
        and medical facilities that have expertise or equipment that 
        can be utilized by the rural facilities through the 
        telecommunications.
            ``(2) Modes of communication.--The Secretary shall ensure 
        that the telecommunications technologies demonstrated under 
        paragraph (1) include interactive video telecommunications, 
        static video imaging transmitted through the telephone
         system, and facsimiles transmitted through such system.''.
    (c) Funding.--Section 1232 of the Public Health Service Act (42 
U.S.C. 300d-32) is amended by striking subsections (a) and (b) and 
inserting the following:
    ``(a) Emergency Medical Services Generally.--For the purpose of 
carrying out section 1201 other than with respect to trauma care, and 
for the purpose of carrying out section 1204(c), there are authorized 
to be appropriated $2,000,000 for each of the fiscal years 1997, 1998, 
and 1999.
    ``(b) State Offices.--For the purpose of carrying out section 1202, 
there are authorized to be appropriated $3,000,000 for each of the 
fiscal years 1997, 1998, and 1999.''.

SEC. 3022. GRANTS TO STATES REGARDING AIRCRAFT FOR TRANSPORTING RURAL 
              VICTIMS OF MEDICAL EMERGENCIES.

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

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

    ``(a) In General.--The Secretary shall make grants to States to 
assist such States in the creation or enhancement of air medical 
transport systems that provide victims of medical emergencies in rural 
areas with access to treatments for the injuries or other conditions 
resulting from such emergencies.
    ``(b) Application and Plan.--
            ``(1) Application.--To be eligible to receive a grant under 
        subsection (a), a State shall prepare and submit to the 
        Secretary an application in such form, made in such manner, and 
        containing such agreements, assurances, and information, 
        including a State plan as required in paragraph (2), as the 
        Secretary determines to be necessary to carry out this section.
            ``(2) State plan.--An application submitted under paragraph 
        (1) shall contain a State plan that shall--
                    ``(A) describe the intended uses of the grant 
                proceeds and the geographic areas to be served;
                    ``(B) demonstrate that the geographic areas to be 
                served, as described under subparagraph (A), are rural 
                in nature;
                    ``(C) demonstrate that there is a lack of 
                facilities available and equipped to deliver advanced 
                levels of medical care in the geographic areas to be 
                served;
                    ``(D) demonstrate that in utilizing the grant 
                proceeds for the establishment or enhancement of air 
                medical services the State would be making a cost-
                effective improvement to existing ground-based or air 
                emergency medical service systems;
                    ``(E) demonstrate that the State will not utilize 
                the grant proceeds to duplicate the capabilities of 
                existing air medical systems that are effectively 
                meeting the emergency medical needs of the populations 
                they serve;
                    ``(F) demonstrate that in utilizing the grant 
                proceeds the State is likely to achieve a reduction in 
                the morbidity and mortality rates of the areas to be 
                served, as determined by the Secretary;
                    ``(G) demonstrate that the State, in utilizing the 
                grant proceeds, will--
                            ``(i) maintain the expenditures of the 
                        State for air and ground medical transport 
                        systems at a level equal to not less than the 
                        level of such expenditures maintained by the 
                        State for the fiscal year preceding the fiscal 
                        year for which the grant is received; and
                            ``(ii) ensure that recipients of direct 
                        financial assistance from the State under such 
                        grant will maintain expenditures of such 
                        recipients for such systems at a level at least 
                        equal to the level of such expenditures 
                        maintained by such recipients for the fiscal 
                        year preceding the fiscal year for which the 
                        financial assistance is received;
                    ``(H) demonstrate that persons experienced in the 
                field of air medical service delivery were consulted in 
                the preparation of the State plan; and
                    ``(I) contain such other information as the 
                Secretary may determine appropriate.
    ``(c) Considerations in Awarding Grants.--In determining whether to 
award a grant to a State under this section, the Secretary shall--
            ``(1) consider the rural nature of the areas to be served 
        with the grant proceeds and the services to be provided with 
        such proceeds, as identified in the State plan submitted under 
        subsection (b); and
            ``(2) give preference to States with State plans that 
        demonstrate an effective integration of the proposed air 
        medical transport systems into a comprehensive network or plan 
        for regional or statewide emergency medical service delivery.
    ``(d) State Administration and Use of Grant.--
            ``(1) In general.--The Secretary may not make a grant to a 
        State under subsection (a) unless the State agrees that such 
        grant will be administered by the State agency with principal 
        responsibility for carrying out programs regarding the 
        provision of medical services to victims of medical emergencies 
        or trauma.
            ``(2) Permitted uses.--A State may use amounts received 
        under a grant awarded under this section to award subgrants to 
        public and private entities operating within the State.
            ``(3) Opportunity for public comment.--The Secretary may 
        not make a grant to a State under subsection (a) unless that 
        State agrees that, in developing and carrying out the State 
        plan under subsection (b)(2), the State will provide public 
        notice with respect to the plan (including any revisions 
        thereto) and facilitate comments from interested persons.
    ``(e) Number of Grants.--The Secretary shall award grants under 
this section to not less than 7 States.
    ``(f) Reports.--
            ``(1) Requirement.--A State that receives a grant under 
        this section shall annually (during each year in which the 
        grant proceeds are used) prepare and submit to the Secretary a 
        report that shall contain--
                    ``(A) a description of the manner in which the 
                grant proceeds were utilized;
                    ``(B) a description of the effectiveness of the air 
                medical transport programs assisted with grant 
                proceeds; and
                    ``(C) such other information as the Secretary may 
                require.
            ``(2) Termination of funding.--In reviewing reports 
        submitted under paragraph (1), if the Secretary determines that 
        a State is not using amounts provided under a grant awarded 
        under this section in accordance with the State plan submitted 
        by the State under subsection (b), the Secretary may terminate 
        the payment of amounts under such grant to the State until such 
        time as the Secretary determines that the State comes into 
        compliance with such plan.
    ``(g) Definition.--As used in this section, the term `rural areas' 
means geographic areas that are located outside of standard 
metropolitan statistical areas, as identified by the Secretary.
    ``(h) Authorization of Appropriations.--There are authorized to be 
appropriated to make grants under this section, such sums as may be 
necessary for each of fiscal years 1997 through 2000.''.

 Subpart B--Demonstration Projects to Encourage Primary Care and Rural-
                    Based Graduate Medical Education

SEC. 3031. STATE AND CONSORTIUM DEMONSTRATION PROJECTS.

    (a) In General.--
            (1) Participation of states and consortia.--The Secretary 
        shall establish and conduct a demonstration project to increase 
        the number and percentage of medical students entering primary 
        care practice relative to those entering nonprimary care 
        practice under which the Secretary shall make payments in 
        accordance with subsection (d)--
                    (A) to not more than 10 States for the purpose of 
                testing and evaluating mechanisms to meet the goals 
                described in section 3032; and
                    (B) to not more than 10 health care training 
                consortia for the purpose of testing and evaluating 
                mechanisms to meet such goals.
            (2) Exclusion of consortia in participating states.--A 
        consortia may not receive payments under the demonstration 
        project under paragraph (1)(B) if any of its members is located 
        in a State receiving payments under the project under paragraph 
        (1)(A).
    (b) Applications.--
            (1) In general.--Each State and consortium desiring to 
        conduct a demonstration project under this section shall 
        prepare and submit to the Secretary an application, at such 
        time, in such manner, and containing such information as the 
        Secretary may require to assure that the State or consortium 
        will meet the goals described in section 3032. In the case of 
        an application of a State, the application shall include--
                    (A) information demonstrating that the State has 
                consulted with interested parties with respect to the 
                project, including State medical associations, State 
                hospital associations, and medical schools located in 
                the State;
                    (B) an assurance that no hospital conducting an 
                approved medical residency training program in the 
                State will lose more than 10 percent of such hospital's 
                approved medical residency positions in any year as a 
                result of the project; and
                    (C) an explanation of a plan for evaluating the 
                impact of the project in the State.
            (2) Approval of applications.--A State or consortium that 
        submits an application under paragraph (1) may begin a 
        demonstration project under this subsection--
                    (A) upon approval of such application by the 
                Secretary; or
                    (B) at the end of the 60-day period beginning on 
                the date such application is submitted, unless the 
                Secretary denies the application during such period.
            (3) Notice and comment.--A State or consortium shall issue 
        a public notice on the date it submits an application under 
        paragraph (1) which contains a general description of the 
        proposed demonstration project. Any interested party may 
        comment on the proposed demonstration project to the State or 
        consortium or the Secretary during the 30-day period beginning 
        on the date the public notice is issued.
    (c) Specific Requirements for Participants.--
            (1) Requirements for states.--Each State participating in 
        the demonstration project under this subtitle shall use the 
        payments provided under subsection (d) to test and evaluate 
        either of the following mechanisms to increase the number and 
        percentage of medical students entering primary care practice 
        relative to those entering nonprimary care practice:
                    (A) Use of alternative weighting factors.--
                            (i) In general.--The State may make 
                        payments to hospitals in the State for direct 
                        graduate medical education costs in amounts 
                        determined under the methodology provided under 
                        section 1886(h) of the Social Security Act, 
                        except that the State shall apply weighting 
                        factors that are different than the weighting 
                        factors otherwise set forth in section 
                        1886(h)(4)(C) of the Social Security Act.
                            (ii) Use of payments for primary care 
                        residents.--In applying different
                         weighting factors under clause (i), the State 
shall ensure that the amount of payment made to hospitals for costs 
attributable to primary care residents shall be greater than the amount 
that would have been paid to hospitals for costs attributable to such 
residents if the State had applied the weighting factors otherwise set 
forth in section 1886(h)(4)(C) of the Social Security Act.
                    (B) Payments for medical education through 
                consortium.--The State may make payments for graduate 
                medical education costs through payments to a health 
                care training consortium (or through any entity 
                identified by such a consortium as appropriate for 
                receiving payments on behalf of the consortium) that is 
                established in the State but that is not otherwise 
                participating in the demonstration project.
            (2) Requirements for consortium.--
                    (A) In general.--In the case of a consortium 
                participating in the demonstration project under this 
                subtitle, the Secretary shall make payments for 
                graduate medical education costs through a health care 
                training consortium whose members provide medical 
                residency training (or through any entity identified by 
                such a consortium as appropriate for receiving payments 
                on behalf of the consortium).
                    (B) Use of payments.--
                            (i) In general.--Each consortium receiving 
                        payments under subparagraph (A) shall use such 
                        funds to conduct activities which test and 
                        evaluate mechanisms to increase the number and 
                        percentage of medical students entering primary 
                        care practice relative to those entering 
                        nonprimary care practice, and may use such 
                        funds for the operation of the consortium.
                            (ii) Payments to participating programs.--
                        The consortium shall ensure that the majority 
                        of the payments received under subparagraph (A) 
                        are directed to consortium members for primary 
                        care residency programs, and shall designate 
                        for each resident assigned to the consortium a 
                        hospital operating an approved medical 
                        residency training program for purposes of 
                        enabling the Secretary to calculate the 
                        consortium's payment amount under the project. 
                        Such hospital shall be the hospital where the 
                        resident receives the majority of the 
                        resident's hospital-based, nonambulatory 
                        training experience.
    (d) Allocation of Portion of Medicare GME Payments for Activities 
Under Project.--Notwithstanding any provision of title XVIII of the 
Social Security Act, the following rules apply with respect to each 
State and each health care training consortium participating in the 
demonstration project established under this section during a year:
            (1) In the case of a State--
                    (A) the Secretary shall reduce the amount of each 
                payment made to hospitals in the State during the year 
                for direct graduate medical education costs under 
                section 1886(h) of the Social Security Act by 3 
                percent; and
                    (B) the Secretary shall pay the State an amount 
                equal to the Secretary's estimate of the sum of the 
                reductions made during the year under subparagraph (A) 
                (as adjusted by the Secretary in subsequent years for 
                over- or under-estimations in the amount estimated 
                under this subparagraph in previous years).
            (2) In the case of a consortium--
                    (A) the Secretary shall reduce the amount of each 
                payment made to hospitals who are members of the 
                consortium during the year for direct graduate medical 
                education costs under section 1886(h) of the Social 
                Security Act by 3 percent; and
                    (B) the Secretary shall pay the consortium an 
                amount equal to the Secretary's estimate of the sum of 
                the reductions made during the year under subparagraph 
                (A) (as adjusted by the Secretary in subsequent years 
                for over- or under-estimations in the amount estimated 
                under this subparagraph in previous years).
    (e) Additional Grant for Planning and Evaluation.--
            (1) In general.--The Secretary may award grants to States 
        and consortia participating in the demonstration project under 
        this section for the purpose of developing and evaluating such 
        projects. A State or consortia may conduct such an evaluation 
        or contract with a private entity to conduct the evaluation. 
        Each State and consortia desiring to receive a grant under this 
        paragraph shall prepare and submit to the Secretary an 
        application, at such time, in such manner, and containing such 
        information as the Secretary may require.
            (2) Authorization of appropriations.--There are authorized 
        to be appropriated such sums as may be necessary for grants 
        under this paragraph for fiscal years 1997 through 2001.
    (f) Duration.--A demonstration project under this section shall be 
conducted for a period not to exceed 5 years. The Secretary may 
terminate a project if the Secretary determines that the State or 
consortium conducting the project is not in substantial compliance with 
the terms of the application approved by the Secretary.
    (g) Evaluations and Reports.--
            (1) Evaluations.--Each State or consortium participating in 
        the demonstration project shall submit to the Secretary a final 
        evaluation within 360 days of the termination of the State or 
        consortium's participation and such interim evaluations as the 
        Secretary may require.
            (2) Reports to congress.--Not later than 360 days after the 
        first demonstration project under this subtitle begins, and 
        annually thereafter for each year in which such a project is 
        conducted, the Secretary shall submit a report to Congress 
        which evaluates the effectiveness of the State and consortium 
        activities conducted under such projects and includes any 
        legislative recommendations determined appropriate by the 
        Secretary.
    (h) Maintenance of Effort.--Any funds available for the activities 
covered by a demonstration project under this subtitle shall 
supplement, and shall not supplant, funds that are expended for similar 
purposes under any State, regional, or local program.

SEC. 3032. GOALS FOR PROJECTS.

    The goals referred to in this section for a State or consortium 
participating in the demonstration project under this subtitle are as 
follows:
            (1) The training of an equal number of physician and non-
        physician primary care providers.
            (2) The recruiting of residents for graduate medical 
        education training programs who received a portion of 
        undergraduate training in a rural area.
            (3) The allocation of not less than 50 percent of the 
        training spent in a graduate medical residency training program 
        at sites at which acute care inpatient hospital services are 
        not furnished.
            (4) The rotation of residents in approved medical residency 
        training programs among practices that serve residents of rural 
        areas.
            (5) The development of a plan under which, after a 5-year 
        transition period, not less than 50 percent of the residents 
        who begin an initial residency period in an approved medical 
        residency training program shall be primary care residents.

SEC. 3033. DEFINITIONS.

    In this subpart:
            (1) Approved medical residency training program.--The term 
        ``approved medical residency training program'' has the meaning 
        given such term in section 1886(h)(5)(A) of the Social Security 
        Act.
            (2) Health care training consortium.--The term ``health 
        care training consortium'' means a State, regional, or local 
        entity consisting of at least one of each of the following:
                    (A) A hospital operating an approved medical 
                residency training program at which residents receive 
                training at ambulatory training sites located in rural 
                areas.
                    (B) A school of medicine or osteopathic medicine.
                    (C) A school of allied health or a program for the 
                training of physician assistants (as such terms are 
                defined in section 799 of the Public Health Service 
                Act).
                    (D) A school of nursing (as defined in section 853 
                of the Public Health Service Act).
            (3) Primary care.--The term ``primary care'' means family 
        practice, general internal medicine, general pediatrics, and 
        obstetrics and gynecology.
            (4) Resident.--The term ``resident'' has the meaning given 
        such term in section 1886(h)(5)(H) of the Social Security Act.
            (5) Rural area.--The term ``rural area'' has the meaning 
        given such term in section 1886(d)(2)(D) of the Social Security 
        Act.

   Subpart C--Medicare Demonstration Regarding Consortia of Hospitals

SEC. 3041. MEDICARE DEMONSTRATION REGARDING CONSORTIA OF HOSPITALS.

    (a) In General.--The Secretary shall establish and conduct not more 
than 10 demonstration projects to increase the number and percentage of 
medical students entering primary care practice relative to those 
entering nonprimary care practice under which the Secretary shall make 
payments in accordance with subsection (c) to participating health care 
training consortia.
    (b) Applications.--Each consortium desiring to participate in a 
demonstration project under this section shall prepare and submit to 
the Secretary an application at such time and in such manner as the 
Secretary may require, and containing--
            (1) an explanation of a plan with the goal of training at 
        least 50 percent of all residents participating in approved 
        residency training programs conducted by members of the 
        consortium as primary care residents (as defined in subsection 
        (f)(4)); and
            (2) such other information and assurances as the Secretary 
        may require.
    (c) Payments to Participants.--
            (1) In general.--Notwithstanding any provision of title 
        XVIII of the Social Security Act--
                    (A) in the case of a consortium participating in a 
                demonstration project under this subtitle, the 
                Secretary shall make payments under such title for the 
                direct and indirect costs of graduate medical education 
                of members of the consortium to the consortium (or 
                through any entity identified by such a consortium as 
                appropriate for receiving payments on behalf of the 
                consortium), except that the amount paid to the 
                consortium shall be based on the designations described 
                in paragraph (2); and
                    (B) the Secretary may not make any payment under 
                such title to a member of a consortium for the direct 
                and indirect costs of graduate medical education during 
                the period of the consortium's participation in the 
                demonstration project.
            (2) Designation of residents by consortium.--Each 
        consortium participating in a demonstration project shall 
        designate for each resident assigned to the consortium a 
        hospital operating an approved medical residency training 
        program for purposes of enabling the Secretary to calculate the 
        amount paid to the consortium under paragraph (1)(A). Such 
        hospital shall be the hospital where the resident receives the 
        majority of the resident's hospital-based, nonambulatory 
        training experience.
            (3) Limit on payment.--The amount paid to a consortium 
        under paragraph (1)(A) during a year may not exceed the 
        Secretary's estimate of the sum of the payments that would have 
        been made under title XVIII to each member of the consortium 
        during the year but for the application of this section, 
        determined as if such payments were based on--
                    (A) the number of full-time-equivalent residents in 
                approved medical residency training programs of the 
                member calculated under section 1886(h)(4) of the 
                Social Security Act during the academic year beginning 
                July 1, 1994; and
                    (B) the ratio of the member's full-time equivalent 
                interns and residents to beds applicable under section 
                1886(d)(5)(B)(ii) of such Act for discharges occurring 
                during the 12-month cost reporting period beginning or 
                after July 1, 1994.
    (d) Duration.--A demonstration project under this section shall be 
conducted for a period not to exceed 10 years. The Secretary may 
terminate a project if the Secretary determines that the consortium 
participating in the project is not in substantial compliance with the 
terms of the application approved by the Secretary.
    (e) Evaluations and Reports.--
            (1) Evaluations.--Each consortium participating in a 
        demonstration project shall submit to the Secretary a final 
        evaluation within 360 days of the termination of the 
        consortium's participation and such interim evaluations as the 
        Secretary may require.
            (2) Reports to congress.--Not later than 360 days after the 
        first demonstration project under this section begins, and 
        annually thereafter for each year in which such a project is 
        conducted, the Secretary shall submit a report to Congress 
        which evaluates the effectiveness of the consortium activities 
        conducted under such projects and includes any legislative 
        recommendations determined appropriate by the Secretary.
    (f) Definitions.--In this section:
            (1) Approved medical residency training program.--The term 
        ``approved medical residency training program'' has the meaning 
        given such term in section 1886(h)(5)(A) of the Social Security 
        Act.
            (2) Health care training consortium.--The term ``health 
        care training consortium'' means a State, regional, or local 
        entity consisting of at least 2 hospitals operating approved 
        medical residency training programs.
            (3) Resident.--The term ``resident'' has the meaning given 
        such term in section 1886(h)(5)(H) of the Social Security Act.
            (4) Primary care resident.--The term ``primary care 
        resident'' means a resident enrolled in an approved medical 
        residency training program in family medicine, general internal 
        medicine, general pediatrics, preventive medicine, geriatric 
        medicine, osteopathic general practice, or obstetrics and 
        gynecology.
                    Subtitle B--Public Health Grants
                                                  Title III, Subtitle B
SEC. 3101. GRANTS TO STATES FOR PUBLIC HEALTH PROGRAMS.

    Part B of title III of the Public Health Service Act (42 U.S.C. 243 
et seq.), as amended by section 703 of Public Law 103-183 (107 Stat. 
2240), is amended by inserting after section 317F the following 
section:

             ``grants to states for public health programs

    ``Sec. 317G. (a) In General.--The Secretary may make grants to 
States for the following purposes:
            ``(1) Education and training of public health 
        professionals.
            ``(2) Prevention and control of poisoning.
            ``(3) Prevention and control of infectious diseases.
            ``(4) Laboratory services regarding public health.
            ``(5) Community and school-based health education.
            ``(6) Prevention programs regarding public health.
            ``(7) Community and school-based public-health services.
            ``(8) Collection and reporting of data regarding public 
        health.
    ``(b) Authorization of Appropriations.--For the purpose of carrying 
out this section, there are authorized to be appropriated such sums as 
may be necessary for each of the fiscal years 1996 through 1998.''.

SEC. 3102. SCHOLARSHIP AND LOAN REPAYMENT PROGRAMS REGARDING SERVICE IN 
              PUBLIC HEALTH POSITIONS.

    Part D of title VII of the Public Health Service Act (42 U.S.C. 294 
et seq.) is amended--
            (1) by redesignating subparts II and III as subparts III 
        and IV, respectively; and
            (2) by inserting after subpart I the following subpart:

``Subpart II--Scholarship and Loan Repayment Programs Regarding Service 
                       in Public Health Positions

``SEC. 765A. SCHOLARSHIP AND LOAN REPAYMENT PROGRAMS.

    ``(a) Scholarship Program.
            ``(1) In general.--The Secretary, acting through the 
        Administrator of the Health Resources and Services 
        Administration and in consultation with the Director of the 
        Centers for Disease Control and Prevention, shall carry out a 
        program under which the Secretary awards scholarships to 
        individuals described in paragraph (2) for the purpose of 
        assisting the individuals with the costs of attending public 
        and nonprofit private schools of public health (or other public 
        or nonprofit private institutions providing graduate or 
        specialized training in public health).
            ``(2) Eligible individuals.--An individual referred to in 
        paragraph (1) is any individual meeting the following 
        conditions:
                    ``(A) The individual is enrolled (or accepted for 
                enrollment) at a school or other institution referred 
                to in paragraph (1) as a full-time or part-time student 
                in a program providing training in a health profession 
                in a field of public health (including the fields of 
                epidemiology, biostatistics, environmental health, 
                health administration and planning, behavioral 
                sciences, maternal and child health, occupational 
                safety, public health nursing, nutrition, and 
                toxicology).
                    ``(B) The individual enters into the contract 
                required pursuant to subsection (c) as a condition of 
                receiving the scholarship (relating to an agreement to 
                provide services in approved public health positions, 
                as defined in subsection (c).
            ``(3) Eligible schools.--For fiscal year 1997 and 
        subsequent fiscal years, the Secretary may make an award of a 
        scholarship under paragraph (1) only if the Secretary 
        determines that--
                    ``(A) the school or other institution with respect 
                to which the award is to be provided has coordinated 
                the activities of the school or institution with 
                relevant activities of the Health Resources and 
                Services Administration and the Centers for Disease 
                Control and Prevention; and
                    ``(B) not fewer than 60 percent of the graduates of 
                the school or institution are in public health 
                positions determined by the Secretary to be consistent 
                with the needs of the United States regarding such 
                professionals.
            ``(4) Applicability of certain provisions.--Except as 
        inconsistent with this subsection or subsection (c), the 
        provisions of subpart III of part D of title III (relating to 
        the Scholarship and Loan Repayment Programs of the National 
        Health Service Corps) apply to an award of a scholarship under 
        paragraph (1) to the same extent and in the same manner as such 
        provisions apply to an award of a scholarship under section 
        338A.
    ``(b) Loan Repayment Program.--
            ``(1) In general.--The Secretary, acting through the 
        Administrator of the Health Resources and Services 
        Administration and in consultation with the Director of the 
        Centers for Disease Control and Prevention, shall carry out a 
        program under which the Federal Government enters into 
        agreements to repay all or part of the educational loans of 
        individuals meeting the following conditions:
                    ``(A) The individual involved is a graduate of a 
                school or other institution described in subsection 
                (a)(1).
                    ``(B) The individual meets the applicable legal 
                requirements to provide services as a public health 
                professional (including a professional in any of the 
                fields specified in subsection (a)(2)(A)).
                    ``(C) The individual enters into the contract 
                required pursuant to subsection (c) as a condition of 
                the Federal Government repaying such loans (relating to 
                an agreement to provide services in approved public 
                health positions, as defined in subsection (c)).
            ``(2) Applicability of certain provisions.--Except as 
        inconsistent with this subsection or subsection (c), the 
        provisions of subpart III of part D of title III (relating to 
        the Scholarship and Loan Repayment Programs of the National 
        Health Service Corps) apply to an agreement regarding repayment 
        under paragraph (1) to the same extent and in the same manner 
        as such provisions apply to an agreement regarding repayment 
        under section 338B.
            ``(3) Amount of repayments.--For each year for which an 
        individual contracts to serve in an approved public health 
        position pursuant to paragraph (2), the Secretary may repay not 
        more than $20,000 of the principal and interest of the 
        educational loans of the individual.
    ``(c) Approved Public Health Positions.--
            ``(1) Position regarding populations with significant need 
        for services.--
                    ``(A) With respect to the programs under this 
                section, the obligated service of a program participant 
                pursuant to subsections (a)(4) and (b)(2) shall be 
                provided through an assignment, to an entity described 
                in paragraph (2), for a position in which the 
                participant provides services as a public health 
                professional to a population determined by the 
                Secretary to have a significant unmet need for the 
                services of such a professional.
                    ``(B) For purposes of subsection (a)(4) and (b)(2), 
                the period of obligated service is the following, as 
                applicable to the program participant involved:
                            ``(i) In the case of scholarships under 
                        subsection (a) for full-time students, the 
                        greater of--
                                    ``(I) 1 year for each year for 
                                which such a scholarship is provided; 
                                or
                                    ``(II) 2 years.
                            ``(ii) In the case of scholarships under 
                        subsection (a) for part-time students, a period 
                        determined by the Secretary on the basis of the 
                        number of hours of education or training 
                        received under the scholarship, considering the 
                        percentage constituted by the ratio of such 
                        number to the number of hours for a full-time 
                        student in the program involved.
                            ``(iii) In the case of the loan repayments 
                        under subsection (b), such period as the 
                        Secretary and the participant may agree, except 
                        that the period may not be less than 2 years.
            ``(2) Approval of entities for assignment of program 
        participants.--The entities referred to in paragraph (1)(A) are 
        public and nonprofit private entities approved by the Secretary 
        as meeting such requirements for the assignment of a program 
        participant as the Secretary may establish. The entities that 
        the Secretary may so approve include State and local 
        departments of health, public hospitals, community and 
        neighborhood health clinics, migrant health clinics, community-
        based health-related organizations, certified regional poison 
        control centers, purchasing cooperatives regarding health 
        insurance, and any other public or nonprofit private entity.
            ``(3) Definitions.--For purposes of this section:
            ``(1) The term `approved public health position', with 
        respect to a program participant, means a position to which the 
        participant is assigned pursuant to paragraph (1).
                    ``(B) The term `program participant' means an 
                individual who enters into a contract pursuant to 
                subsection (a)(2)(B) or subsection (b)(1)(C).
    ``(d) Certain Considerations.--
            ``(1) Special consideration for certain individuals.--In 
        making awards of scholarships under subsection (a) and making 
        repayments under subsection (b), the Secretary shall give 
        special consideration to individuals who are in the armed 
        forces of the United States or who are veterans of the armed 
        forces.
            ``(2) School health education programs.--The Secretary 
        shall ensure that the approved public health positions to which 
        the Secretary assigns program participants under this part 
        include positions in programs that provide education on the 
        promotion of health and the prevention of diseases and that are 
        carried out on the premises of public or nonprofit private 
        elementary and secondary schools.
    ``(e) Funding.--
            ``(1) Authorization of appropriations.--For the purpose of 
        carrying out this section, there are authorized to be 
        appropriated such sums as may
         be necessary for each of the fiscal years 1996 through 1998.
            ``(2) Allocations.--Of the amounts appropriated under 
        subsection (a) for a fiscal year, the Secretary shall obligate 
        not less than 30 percent for the purpose of providing awards 
        for scholarships under subsection (a) to individuals who have 
        not previously received such scholarships.''.

                  Subtitle C--Academic Health Centers
                                                  Title III, Subtitle C
SEC. 3201. STUDY OF PAYMENTS FOR MEDICAL EDUCATION AT SITES OTHER THAN 
              HOSPITALS.

    (a) Study.--The Secretary of Health and Human Services shall 
conduct a study of the feasibility and desirability of making payments 
to facilities that are not hospitals for the direct and indirect costs 
of graduate medical education attributable to residents trained at such 
facilities. In conducting the study, the Secretary shall evaluate new 
payment methodologies--
            (1) under which each entity which incurs costs of graduate 
        medical education shall receive reimbursement for such costs; 
        and
            (2) which would encourage the training of primary care 
        physicians.
    (b) Report.--Not later than 2 years after the date of the enactment 
of this Act, the Secretary shall submit a report to Congress a report 
on the study conducted under subsection (a), and shall include in the 
report such recommendations as the Secretary considers appropriate.

SEC. 3202. STUDY OF FUNDING NEEDS OF HEALTH PROFESSIONS SCHOOLS.

    (a) In General.--The Secretary shall conduct a study for the 
purpose of determining the funding needs of health professions schools, 
including schools of medicine and osteopathic medicine, schools of 
dentistry, and schools of public health.
    (b) Consideration of Certain Costs.--In conducting the study under 
subsection (a), the Secretary shall also consider the following costs 
regarding the funding needs of health professions schools:
            (1) Uncompensated costs incurred in providing health care.
            (2) Costs resulting from reduced productivity due to 
        teaching responsibilities.
            (3) Increased costs of caring for the health needs of 
        patients with severe medical complications.
            (4) Uncompensated costs incurred by faculty, residents, and 
        students in providing consultations for hospitalized patients.
            (5) Uncompensated costs incurred in conducting clinical 
        research.
    (c) Considerations Regarding Additional Funding.--In conducting the 
study under subsection (a), the Secretary shall determine the 
following:
            (1) Whether the health professions schools involved have a 
        significant need for an increase in the amount of funds 
        available to the schools.
            (2) If there is such a need--
                    (A) recommendations regarding the sources of funds 
                to provide the increase; and
                    (B) recommendations for a methodology for 
                determining the amount that should be provided to the 
                schools involved.
    (d) Report to Congress.--Not later than 18 months after the date of 
the enactment of this Act, the Secretary shall submit to the Congress a 
report describing the findings and recommendations made in the study.
                      TITLE IV--MALPRACTICE REFORM

               Subtitle A--Findings; Purpose; Definitions
                                                   Title IV, Subtitle A
SEC. 4001. FINDINGS; PURPOSE.

    (a) Findings.--Congress finds that--
            (1) the health care and insurance industries are industries 
        affecting interstate commerce and the medical malpractice 
        litigation systems existing throughout the United States affect 
        interstate commerce by contributing to the high cost of health 
        care and premiums for malpractice insurance purchased by health 
        care providers; and
            (2) the Federal Government has a major interest in health 
        care as a direct provider of health care and as a source of 
        payment for health care, and has a demonstrated interest in 
        assessing the quality of care, access to care, and the costs of 
        care through the evaluative activities of several Federal 
        agencies.
    (b) Purpose.--It is the purpose of this title to--
            (1) provide grants to States to develop alternative dispute 
        resolution procedures to attain a more efficient, expeditious, 
        and equitable resolution of health care malpractice disputes;
            (2) enhance general knowledge concerning the benefits of 
        different forms of alternative dispute resolution mechanisms; 
        and
            (3) establish uniformity and curb excesses in the State-
        based medical liability systems through Federally-mandated 
        reforms.

SEC. 4002. DEFINITIONS.

    As used in this title:
            (1) Alternative dispute resolution system.--The term 
        ``alternative dispute resolution system'' means a system that 
        is enacted or adopted by a State to resolve medical malpractice 
        claims other than through a medical malpractice liability 
        action.
            (2) Claimant.--The term ``claimant'' means any person who 
        brings a health care liability action and, in the case of an 
        individual who is deceased, incompetent, or a minor, the person 
        on whose behalf such an action is brought.
            (3) Clear and convincing evidence.--The term ``clear and 
        convincing evidence'' is that measure or degree of proof that 
        will produce in the mind of the trier of fact a firm belief or 
        conviction as to the truth of the allegations sought to be 
        established, except that such measure or degree of proof is 
        more than that required under a preponderance of the evidence, 
        but less than that required for proof beyond a reasonable 
        doubt.
            (4) Economic damages.--The term ``economic damages'' means 
        damages paid to compensate an individual for losses for 
        hospital and other medical expenses, lost wages, lost 
        employment, and other pecuniary losses.
            (5) Health care professional.--The term ``health care 
        professional'' means any individual who provides health care 
        services in a State and who is required by State law or 
        regulation to be licensed or certified by the State to provide 
        such services in the State.
            (6) Health care provider.--The term ``health care 
        provider'' means any organization or institution that is 
        engaged in the delivery of health care services in a State that 
        is required by State law or regulation to be licensed or 
        certified by the State to engage in the delivery of such 
        services in the State.
            (7) Injury.--The term ``injury'' means any illness, 
        disease, or other harm that is the subject of a medical 
        malpractice claim.
            (8) Medical malpractice liability action.--The term 
        ``medical malpractice liability action'' means any civil action 
        brought pursuant to State law in which a plaintiff alleges a 
        medical malpractice claim against a health care provider or 
        health care professional, but does not include any action in 
        which the plaintiff's sole allegation is an allegation of an 
        intentional tort.
            (9) Medical malpractice claim.--The term ``medical 
        malpractice claim'' means any claim relating to the provision 
        of (or the failure to provide) health care services or the use 
        of a medical product, without regard to the theory of liability 
        asserted, and includes any third-party claim, cross-claim, 
        counterclaim, or contribution claim in a medical malpractice 
        liability action.
            (10) Medical product.--
                    (A) In general.--The term ``medical product'' 
                means, with respect to the allegation of a claimant, a 
                drug (as defined in section 201(g)(1) of the Federal 
                Food, Drug, and Cosmetic Act (21 U.S.C. 321(g)(1)) or a 
                medical device (as defined in section 201(h) of the 
                Federal Food, Drug, and Cosmetic Act (21 U.S.C. 321(h)) 
                if--
                            (i) such drug or device was subject to 
                        premarket approval under section 505, 507, or 
                        515 of the Federal Food, Drug, and Cosmetic Act 
                        (21 U.S.C. 355, 357, or 360e) or section 351 of 
                        the Public Health Service Act (42 U.S.C. 262) 
                        with respect to the safety of the formulation 
                        or performance of the aspect of such drug or 
                        device which is the subject of the claimant's 
                        allegation or the adequacy of the packaging or 
                        labeling of such drug or device, and such drug 
                        or device is approved by the Food and Drug 
                        Administration; or
                            (ii) the drug or device is generally 
                        recognized as safe and effective under 
                        regulations issued by the Secretary of Health 
                        and Human Services under section 201(p) of the 
                        Federal Food, Drug, and Cosmetic Act (21 U.S.C. 
                        321(p)).
                    (B) Exception in case of misrepresentation or 
                fraud.--Notwithstanding subparagraph (A), the term 
                ``medical product'' shall not include any product 
                described in such subparagraph if the claimant shows 
                that the product is approved by the Food and Drug 
                Administration for marketing as a result of withheld 
                information, misrepresentation, or an illegal payment 
                by manufacturer of the product.
            (11) Noneconomic damages.--The term ``noneconomic damages'' 
        means damages paid to compensate an individual for losses for 
        physical and emotional pain, suffering, inconvenience, physical 
        impairment, mental anguish, disfigurement, loss of
         enjoyment of life, loss of consortium, and other nonpecuniary 
losses, but does not include punitive damages.
            (12) Punitive damages.--The term ``punitive damages'' means 
        compensation, in addition to compensation for actual harm 
        suffered, that is awarded for the purpose of punishing a person 
        for conduct deemed to be malicious, wanton, willful, or 
        excessively reckless.
            (13) Secretary.--The term ``Secretary'' means the Secretary 
        of Health and Human Services.
            (14) State.--The term ``State'' means each of the several 
        States, the District of Columbia, the Commonwealth of Puerto 
        Rico, the Virgin Islands, and Guam.

          Subtitle B--Uniform Standards for Malpractice Claims
                                                   Title IV, Subtitle B
SEC. 4101. APPLICABILITY.

    Except as provided in section 4110, this subtitle shall apply to 
any medical malpractice liability action brought in a Federal or State 
court, and to any medical malpractice claim subject to an alternative 
dispute resolution system, that is initiated on or after January 1, 
1996.

SEC. 4102. REQUIREMENT FOR INITIAL RESOLUTION OF ACTION THROUGH 
              ALTERNATIVE DISPUTE RESOLUTION.

    (a) In General.--
            (1) State cases.--A medical malpractice liability action 
        may not be brought in any State court during a calendar year 
        unless the medical malpractice liability claim that is the 
        subject of the action has been initially resolved under an 
        alternative dispute resolution system certified for the year by 
        the Secretary under section 4202(a), or, in the case of a State 
        in which such a system is not in effect for the year, under the 
        alternative Federal system established under section 4202(b).
            (2) Federal diversity actions.--A medical malpractice 
        liability action may not be brought in any Federal court under 
        section 1332 of title 28, United States Code, during a calendar 
        year unless the medical malpractice liability claim that is the 
        subject of the action has been initially resolved under the 
        alternative dispute resolution system referred to in paragraph 
        (1) that applied in the State whose law applies in such action.
            (3) Claims against united states.--
                    (A) Establishment of process for claims.--The 
                Attorney General shall establish an alternative dispute 
                resolution process for the resolution of tort claims 
                consisting of medical malpractice liability claims 
                brought against the United States under chapter 171 of 
                title 28, United States Code. Under such process, the 
                resolution of a claim shall occur after the completion 
                of the administrative claim process applicable to the 
                claim under section 2675 of such title.
                    (B) Requirement for initial resolution under 
                process.--A medical malpractice liability action based 
                on a medical malpractice liability claim described in 
                subparagraph (A) may not be brought in any Federal 
                court unless the claim has been initially resolved 
                under the alternative dispute resolution process 
                established by the Attorney General under such 
                subparagraph.
    (b) Initial Resolution of Claims Under ADR.--For purposes of 
subsection (a), an action is ``initially resolved'' under an 
alternative dispute resolution system if--
            (1) the ADR reaches a decision on whether the defendant is 
        liable to the plaintiff for damages; and
            (2) if the ADR determines that the defendant is liable, the 
        ADR reaches a decision on the amount of damages assessed 
        against the defendant.
    (c) Procedures for Filing Actions.--
            (1) Notice of intent to contest decision.--Not later than 
        60 days after a decision is issued with respect to a medical 
        malpractice liability claim under an alternative dispute 
        resolution system, each party affected by the decision shall 
        submit a sealed statement to a court of competent jurisdiction 
        indicating whether or not the party intends to contest the 
        decision.
            (2) Deadline for filing action.--A medical malpractice 
        liability action may not be brought by a party unless--
                    (A) the party has filed the notice of intent 
                required by paragraph (1); and
                    (B) the party files the action in a court of 
                competent jurisdiction not later than 90 days after the 
                decision resolving the medical malpractice liability 
                claim that is the subject of the action is issued under 
                the applicable alternative dispute resolution system.
            (3) Court of competent jurisdiction.--For purposes of this 
        subsection, the term ``court of competent jurisdiction'' 
        means--
                    (A) with respect to actions filed in a State court, 
                the appropriate State trial court; and
                    (B) with respect to actions filed in a Federal 
                court, the appropriate United States district court.
    (d) Legal Effect of Uncontested ADR Decision.--The decision reached 
under an alternative dispute resolution system shall, for purposes of 
enforcement by a court of competent jurisdiction, have the same status 
in the court as the verdict of a medical malpractice liability action 
adjudicated in a State or Federal trial court. The previous sentence 
shall not apply to a decision that is contested by a party affected by 
the decision pursuant to subsection (c)(1).

SEC. 4103. PROCEDURAL REQUIREMENTS FOR FILING OF ACTIONS.

    (a) Certificate of Merit.--
            (1) In general.--Each individual who files a medical 
        malpractice liability action shall, not later than 90 days 
        after filing the action--
                    (A) submit a certificate of merit described in 
                subsection (b); or
                    (B) post a surety (or equivalent security) bond of 
                $4,000 (or, during the 45-day period that begins on the 
                date the action is filed, a cost bond of $2,000) with 
                the court.
            (2) Extension of deadline.--On the motion of any party to 
        the action or upon a written agreement of the parties filed 
        with the court, the court may extend the deadline specified in 
        paragraph (1) for a period not to exceed 30 days.
            (3) Dismissal for failure to meet requirement.--If an 
        individual filing a medical malpractice liability action fails 
        to meet the requirements of paragraph (1)--
                    (A) the court shall dismiss the action without 
                prejudice to the refiling of the action by the 
                individual; and
                    (B) require the individual to pay any court costs 
                incurred by the defendants as a result of the filing of 
                the action.
            (4) Waiver for good cause.--The court may waive the 
        application of paragraph (1) to a plaintiff if the plaintiff 
        shows good cause that such paragraph should not apply.
            (5) Certificate of merit described.--In paragraph (1), a 
        ``certificate of merit'' is, with respect to an individual 
        filing a medical malpractice liability action, an affidavit 
        declaring that the individual (or the individual's attorney) 
        has obtained a written opinion from a medical expert who is 
        knowledgeable of the relevant medical issues involved in the 
        action that the defendant was negligent and the defendant's 
        conduct was a proximate cause of the alleged injury that is the 
        subject of the action.
    (b) Response to Standard Interrogatories and Requests for 
Documents.--
            (1) Deadline.--Each party to a medical malpractice 
        liability action shall respond to the standard set of 
        interrogatories and requests for production of documents 
        developed pursuant to paragraph (4) as follows:
                    (A) In the case of a plaintiff, the party shall 
                provide the defendant (or the defendant's attorney) 
                with full and complete responses not later than 45 days 
                after filing the action.
                    (B) In the case of a defendant, the party shall 
                provide the plaintiff (or the plaintiff's attorney) 
                with full and complete responses not later than 45 days 
                after receiving the plaintiff's responses under 
                subparagraph (A).
                    (C) In the case of a party who is added to the 
                action after the action is filed, the party shall 
                provide all other parties (or such parties' attorneys) 
                with full and complete responses not later than 45 days 
                after the date of the filing of the pleading by which 
                the party is added to the action.
            (2) Extension of deadline.--On the motion of any party to 
        the action that is supported by good cause, or upon a written 
        agreement of the parties filed with the court, the court shall 
        extend the deadline specified in paragraph (1) for a period not 
        to exceed 30 days.
            (3) Imposition of sanctions for failure to respond.--If a 
        party to a medical malpractice liability action fails to 
        respond to the standard set of interrogatories and requests for 
        production of documents as required under paragraph (1), the 
        party shall be subject to sanctions by the court under any 
        applicable laws, rules, and regulations governing the 
        imposition of sanctions by the court.
            (4) Development of standard interrogatories and requests.--
                    (A) Appointment of expert panels.--The Governor of 
                each State shall appoint a panel to develop the 
                standard set of interrogatories and requests for 
                production of documents that will be used for purposes 
                of this subsection in the courts of the State. The set 
                shall be comprehensive and designed to expedite the 
                discovery process in the courts. The Attorney General 
                shall appoint a panel to develop such set that will be 
                used for purposes of this subsection in the Federal 
                courts.
                    (B) Composition.--Each panel appointed pursuant to 
                subparagraph (A) shall consist of not less than 6 and 
                not more than 12 members, of whom an equal number shall 
                be attorneys who customarily represent plaintiffs in 
                medical malpractice liability actions and attorneys who 
                customarily represent defendants in such actions.
                    (C) Deadlines.--Not later than October 1, 1996, 
                each panel appointed pursuant to subparagraph (A) shall 
                complete and publish the standard set of 
                interrogatories and requests for production of 
                documents.

SEC. 4104. TREATMENT OF NONECONOMIC AND PUNITIVE DAMAGES.

    (a) Limitation on Noneconomic Damages.--The total amount of 
noneconomic damages that may be awarded to a claimant and the members 
of the claimant's family for losses resulting from the injury which is 
the subject of a medical malpractice liability action may not exceed 
$250,000, regardless of the number of parties against whom the action 
is brought or the number of actions brought with respect to the injury.
    (b) No Award of Punitive Damages Against Manufacturer of Medical 
Product.--In the case of a medical malpractice liability action in 
which the plaintiff alleges a claim against the manufacturer of a 
medical product, no punitive or exemplary damages may be awarded 
against such manufacturer.
    (c) Several Liability for Noneconomic Damages.--The liability of 
each defendant for noneconomic damages shall be several only and shall 
not be joint, and each defendant shall be liable only for the amount of 
noneconomic damages allocated to the defendant in direct proportion to 
the defendant's percentage of responsibility (as determined by the 
trier of fact). The previous sentence shall not apply if the defendant 
has been found to be liable as a result of gross negligence or fraud.
    (d) Allocation of Punitive Damage Awards for Provider Licensing and 
Disciplinary Activities.--
            (1) In general.--The total amount of any punitive damages 
        awarded in a medical malpractice liability action shall be paid 
        to the State in which the action is brought (or, in a case 
        brought in Federal court, in the State in which the health care 
        services that caused the injury that is the subject of the 
        action were provided) for the purposes of carrying out the 
        activities described in paragraph (2).
            (2) Activities described.--A State shall use amounts paid 
        pursuant to paragraph (1) to carry out activities to assure the 
        safety and quality of health care services provided in the 
        State, including (but not limited to)--
                    (A) licensing or certifying health care 
                professionals and health care providers in the State;
                    (B) implementing health care quality assurance 
                programs;
                    (C) carrying out public education programs to 
                increase awareness of the availability of comparative 
                quality information on accountable health plans;
                    (D) carrying out programs to reduce malpractice-
                related costs for providers volunteering to provide 
                services in medically underserved areas; and
                    (E) implementing and operating a State alternative 
                dispute resolution system certified by the Secretary 
                under section 4202.
            (3) Maintenance of effort.--A State shall use any amounts 
        paid pursuant to paragraph (1) to supplement and not to replace 
        amounts spent by the State for the activities described in 
        paragraph (2).
    (e) Development of Alternative Limits on Noneconomic Damages.--
            (1) In general.--Not later than 1 year after the date of 
        the enactment of this Act, the Secretary in consultation with 
        the Attorney General shall develop and transmit to Congress 
        alternative limits on the amount of noneconomic damages that 
        may be awarded with respect to medical malpractice liability 
        claims, together with legislative specifications necessary to 
        replace the limit imposed under subsection (a) on the amount of 
        such damages with such alternative limits. The purpose of the 
        development of the limits is to provide certainty and fairness 
        in malpractice awards and to avoid unwarranted disparities 
        among health care providers and health care professionals who 
        have engaged in similar conduct.
            (2) Establishment of separate limits for categories of 
        injuries.--In developing limits under paragraph (1), the 
        Secretary shall establish separate limits for noneconomic 
        damages resulting from each of the following categories of 
        injuries:
                    (A) Non-physical injuries.
                    (B) Insignificant physical injuries.
                    (C) Temporary minor physical injuries.
                    (D) Temporary major physical injuries.
                    (E) Permanent minor physical injuries.
                    (F) Permanent substantial physical injuries.
                    (G) Permanent major physical injuries.
                    (H) Permanent grave physical injuries.
                    (I) Death.
            (3) Factors considered.--In developing limits under 
        paragraph (1) for each of the categories described in paragraph 
        (2), the Secretary shall--
                    (A) examine the most recent available data on the 
                amount of damages awarded with respect to such claims; 
                and
                    (B) set specific limits that reasonably compensate 
                most injured parties at the level of compensation 
                currently provided, excluding those levels of 
                compensation that the Secretary finds unreasonably 
                large.
            (4) Consultation.--In developing limits under this 
        subsection, the Secretary shall consult with representatives of 
        each of the following:
                    (A) Attorneys who represent plaintiffs in medical 
                malpractice liability actions.
                    (B) Attorneys who represent health care 
                professionals and health care providers in medical 
                malpractice liability actions.
                    (C) Physicians and other health care professionals 
                and providers.
                    (D) Individuals who have suffered injury as a 
                result of medical malpractice.
                    (E) Judges who preside over medical malpractice 
                liability actions.
                    (F) Medical ethicists.
                    (G) Health care economists.
                    (H) Liability insurers.
            (5) Guidance to entities resolving claims.--If Congress 
        enacts legislation that imposes the limits developed by the 
        Secretary under this subsection on the amount of noneconomic 
        damages that may be awarded with respect to medical malpractice 
        liability claims, the Secretary shall prepare and disseminate 
        guidelines to assist courts and other entities resolving such 
        claims in the determination of the particular category of 
        injury specified in paragraph (2) to which a claimant's injury 
        shall be assigned for purposes of applying the appropriate 
        limit on such damages.

SEC. 4105. PERIODIC PAYMENTS FOR FUTURE LOSSES.

    (a) In General.--In any medical malpractice liability action in 
which the damages awarded for future economic loss exceeds $100,000, a 
defendant may not be required to pay such damages in a single, lump-sum 
payment, but may be permitted to make such payments on a periodic 
basis. The periods for such payments shall be determined by the court, 
based upon projections of when such expenses are likely to be incurred.
    (b) Waiver.--A court may waive the application of subsection (a) 
with respect to a defendant if the court determines that it is not in 
the best interests of the plaintiff to receive payments for damages on 
such a periodic basis.

SEC. 4106. UNIFORM STATUTE OF LIMITATIONS.

    (a) In General.--No medical malpractice claim may be initiated 
after the expiration of the 2-year period that begins on the date on 
which the alleged injury that is the subject of such claim was 
discovered or the date
 on which the alleged injury that is the subject of such claim was 
discovered or the date on which such injury should reasonably have been 
discovered, whichever is earlier.
    (b) Exception for Minors.--In the case of an alleged injury 
suffered by a minor who has not attained 6 years of age, a medical 
malpractice claim may be initiated after the expiration of the period 
described in subsection (a) if the claim is initiated before the minor 
attains 8 years of age.

SEC. 4107. SPECIAL PROVISION FOR CERTAIN OBSTETRIC SERVICES.

    (a) In General.--In the case of a medical malpractice claim 
relating to services provided during labor or the delivery of a baby, 
if the health care professional or health care provider against whom 
the claim is brought did not previously treat the claimant for the 
pregnancy, the trier of fact may not find that such professional or 
provider committed malpractice and may not assess damages against such 
professional or provider unless the malpractice is proven by clear and 
convincing evidence.
    (b) Applicability to Group Practices or Agreements Among 
Providers.--For purposes of subsection (a), a health care professional 
shall be considered to have previously treated an individual for a 
pregnancy if the professional is a member of a group practice whose 
members previously treated the individual for the pregnancy or is 
providing services to the individual during labor or the delivery of a 
baby pursuant to an agreement with another professional.

SEC. 4108. UNIFORM STANDARD FOR DETERMINING LIABILITY IN ACTIONS BASED 
              ON NEGLIGENCE.

    (a) Standard of Reasonableness.--Except as provided in subsection 
(b), a defendant in a medical malpractice liability action may not be 
found to have committed malpractice unless the defendant's conduct at 
the time of providing the health care services that are the subject of 
the action was not reasonable.
    (b) Actions Brought Under Strict Liability.--Subsection (a) shall 
not apply with respect to a medical malpractice action if (in 
accordance with applicable State law) the theory of liability upon 
which the action is based is a theory of strict liability.

SEC. 4109. JURISDICTION OF FEDERAL COURTS.

    Nothing in this subtitle shall be construed to establish 
jurisdiction over any medical malpractice liability action in the 
district courts of the United States on the basis of sections 1331 or 
1337 of title 28, United States Code.

SEC. 4110. PREEMPTION.

    (a) In General.--This subtitle supersedes any State law only to the 
extent that the State law permits the recovery by a claimant or the 
assessment against a defendant of a greater amount of damages or 
establishes a less strict standard of proof for determining whether a 
defendant has committed malpractice, than the provisions of this 
subtitle.
    (b) Effect on Sovereign Immunity and Choice of Law or Venue.--
Nothing in this subtitle shall be construed to--
            (1) waive or affect any defense of sovereign immunity 
        asserted by any State under any provision of law;
            (2) waive or affect any defense of sovereign immunity 
        asserted by the United States;
            (3) affect the applicability of any provision of the 
        Foreign Sovereign Immunities Act of 1976;
            (4) preempt State choice-of-law rules with respect to 
        claims brought by a foreign nation or a citizen of a foreign 
        nation; or
            (5) affect the right of any court to transfer venue or to 
        apply the law of a foreign nation or to dismiss a claim of a 
        foreign nation or of a citizen of a foreign nation on the 
        ground in inconvenient forum.
   Subtitle C--Requirements for State Alternative Dispute Resolution 
                             Systems (ADR)
                                                   Title IV, Subtitle C
SEC. 4201. BASIC REQUIREMENTS.

    (a) In General.--A State's alternative dispute resolution system 
meets the requirements of this section if the system--
            (1) applies to all medical malpractice liability claims 
        under the jurisdiction of the courts of that State;
            (2) requires that a written opinion resolving the dispute 
        be issued not later than 6 months after the date by which each 
        party against whom the claim is filed has received notice of 
        the claim (other than in exceptional cases for which a longer 
        period is required for the issuance of such an opinion), and 
        that the opinion contain--
                    (A) findings of fact relating to the dispute, and
                    (B) a description of the costs incurred in 
                resolving the dispute under the system (including any 
                fees paid to the individuals hearing and resolving the 
                claim), together with an appropriate assessment of the 
                costs against any of the parties;
            (3) requires individuals who hear and resolve claims under 
        the system to meet such qualifications as the State may require 
        (in accordance with regulations of the Secretary);
            (4) is approved by the State or by local governments in the 
        State;
            (5) with respect to a State system that consists of 
        multiple dispute resolution procedures--
                    (A) permits the parties to a dispute to select the 
                procedure to be used for the resolution of the dispute 
                under the system, and
                    (B) if the parties do not agree on the procedure to 
                be used for the resolution of the dispute, assigns a 
                particular procedure to the parties;
            (6) provides for the transmittal to the State agency 
        responsible for monitoring or disciplining health care 
        professionals and health care providers of any findings made 
        under the system that such a professional or provider committed 
        malpractice, unless, during the 90-day period beginning on the 
        date the system resolves the claim against the professional or 
        provider, the professional or provider brings an action 
        contesting the decision made under the system; and
            (7) provides for the regular transmittal to the 
        Administrator for Health Care Policy and Research of 
        information on disputes resolved under the system, in a manner 
        that assures that the identity of the parties to a dispute 
        shall not be revealed.
    (b) Application of Malpractice Liability Standards to Alternative 
Dispute Resolution.--The provisions of subtitle B (other than sections 
4102 and 4103) shall apply with respect to claims brought under a State 
alternative dispute resolution system or the alternative Federal system 
in the same manner as such provisions apply with respect to medical 
malpractice liability actions brought in the State.

SEC. 4202. CERTIFICATION OF STATE SYSTEMS; APPLICABILITY OF ALTERNATIVE 
              FEDERAL SYSTEM.

    (a) Certification.--
            (1) In general.--Not later than October 1 of each year 
        (beginning with 1996), the Secretary, in consultation with the 
        Attorney General, shall determine whether a State's alternative 
        dispute resolution system meets the requirements of this part 
        for the following calendar year.
            (2) Basis for certification.--The Secretary shall certify a 
        State's alternative dispute resolution system under this 
        subsection for a calendar year if the Secretary determines 
        under paragraph (1) that the system meets the requirements of 
        section 4201.
    (b) Applicability of Alternative Federal System.--
            (1) Establishment and applicability.--Not later than 
        October 1, 1996, the Secretary, in consultation with the 
        Attorney General, shall establish by rule an alternative 
        Federal ADR system for the resolution of medical malpractice 
        liability claims during a calendar year in States that do not 
        have in effect an alternative dispute resolution system 
        certified under subsection (a) for the year.
            (2) Requirements for system.--Under the alternative Federal 
        ADR system established under paragraph (1)--
                    (A) paragraphs (1), (2), (6), and (7) of section 
                4201(a) shall apply to claims brought under the system;
                    (B) if the system provides for the resolution of 
                claims through arbitration, the claims brought under 
                the system shall be heard and resolved by arbitrators 
                appointed by the Secretary in consultation with the 
                Attorney General; and
                    (C) with respect to a State in which the system is 
                in effect, the Secretary may (at the State's request) 
                modify the system to take into account the existence of 
                dispute resolution procedures in the State that affect 
                the resolution of medical malpractice liability claims.
            (3) Treatment of States with alternative system in 
        effect.--If the alternative Federal ADR system established 
        under this subsection is applied with respect to a State for a 
        calendar year, the State shall make a payment to the United 
        States (at such time and in such manner as the Secretary may 
        require) in an amount equal to 110 percent of the costs 
        incurred by the United States during the year as a result of 
        the application of the system with respect to the State.

SEC. 4203. GRANTS TO STATES.

    (a) In General.--The Secretary shall make grants to States for a 2-
year period to assist States in implementing and operating alternative 
dispute resolution systems that meet the requirements of section 4201.
    (b) Eligibility.--A State is eligible to receive a grant under this 
section if the Secretary has certified the State's alternative dispute 
resolution system under section 4202(b).
    (c) Limitation on Amount of Grant.--The amount of funds provided to 
a State under a grant under this section may not exceed $5,000,000 
during the 2-year period of the grant.

SEC. 4204. REPORTS ON IMPLEMENTATION AND EFFECTIVENESS OF ALTERNATIVE 
              DISPUTE RESOLUTION SYSTEMS.

    (a) In General.--Not later than 5 years after the date of the 
enactment of this Act, the Secretary shall prepare and submit to the 
Congress a report describing and evaluating State alternative dispute 
resolution systems operated pursuant to this subtitle and the 
alternative Federal system established under section 4202(b).
    (b) Contents of Report.--The Secretary shall include in the report 
prepared and submitted under subsection (a)--
            (1) information on--
                    (A) the effect of the alternative dispute 
                resolution systems on the cost of health care within 
                each State,
                    (B) the impact of such systems on the access of 
                individuals to health care within the State, and
                    (C) the effect of such systems on the quality of 
                health care provided within the State; and
            (2) to the extent that such report does not provide 
        information on no-fault systems operated by States as 
        alternative dispute resolution systems pursuant to this part, 
        an analysis of the feasibility and desirability of establishing 
        a system under which medical malpractice liability claims shall 
        be resolved on a no-fault basis.
  Subtitle D--Grants to States for Development of Practice Guidelines
                                                   Title IV, Subtitle D
SEC. 4301. GRANTS TO STATES.

    (a) In General.--The Secretary shall make grants to States for a 2-
year period for the development of medical practice guidelines for 
health care professionals (including mid-level practitioners) that may 
be applied to resolve medical malpractice liability claims and actions 
in the State.
    (b) Eligibility.--A State is eligible to receive a grant under this 
section if the State submits to the Secretary an application at such 
time, in such form, and containing such information and assurances as 
the Secretary may require, including assurances that the State will 
submit such periodic reports on the development and application of the 
State's medical practice guidelines as the Secretary may require.
    (c) Number of Grants.--
            (1) In general.--Except as provided in paragraph (2), the 
        Secretary shall award not less than 10 grants under this 
        section.
            (2) Exception.--Notwithstanding paragraph (1), the 
        Secretary may award less than 10 grants under this section if 
        the Secretary determines that there are an inadequate number of 
        applications submitted that meet the eligibility and approval 
        requirements of this section.
    (d) Limitation on Amount of Grant.--The amount of funds provided to 
a State under a grant under this section may not exceed $5,000,000 
during the 2-year period of the grant.

             TITLE V--MARKET INCENTIVES TO CONTAINING COSTS
               Subtitle A--Administrative Simplification
                                                    Title V, Subtitle A
SEC. 5000. 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 of the Social Security Act and the medicaid program 
under title XIX of such Act, by encouraging the development of a health 
information network through the adoption of standards and the 
establishment of requirements for the electronic transmission of 
certain health information.

SEC. 5001. 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 plan sponsors when health care benefits are 
        payable by more than one such sponsor.
            (3) Health information.--The term ``health information'' 
        means any information that relates to the past, present, or 
        future physical or mental health or condition or functional 
        status of an individual, the provision of health care to an 
        individual, or payment for the provision of health care to an 
        individual.
            (4) 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.
            (5) 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--
                            (i) to process or facilitate the processing 
                        of nonstandard data elements of health 
                        information into standard data elements;
                            (ii) to 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) to provide authorized access to 
                        health information through the health 
                        information network; or
                            (iv) to provide specific information 
                        processing services, such as automated 
                        coordination of benefits and claims transaction 
                        routing; and
                    (B) includes a health information security 
                organization.
            (6) Health information security organization.--The term 
        ``health information security 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 provider.--The term ``health provider'' includes 
        a provider of services (as defined in section 1861(u) of the 
        Social Security Act), a provider of medical or other health 
        services (as defined in section 1861(s) of such Act), and any 
        other person (other than a plan sponsor) furnishing health care 
        items or services.
            (8) Individually identifiable health information.--The term 
        ``individually identifiable health information'' means health 
        information in the health information network--
                    (A) that identifies an individual who is the 
                subject of the information; or
                    (B) with respect to which there is a reasonable 
                basis to believe that the information can be used to 
                identify such an individual.
            (9) Non-identifiable health information.--The term ``non-
        identifiable health information'' means health information that 
        is not individually identifiable health information.
            (10) Plan sponsor.--The term ``plan sponsor'' means--
                    (A) a carrier (as defined in section 1903(2)) 
                providing health insurance coverage (as defined in 
                section 1903(7));
                    (B) a group health plan;
                    (C) an association or other entity which 
                establishes or maintains a multiple employer welfare 
                arrangement (as defined in section 1903(12)) providing 
                benefits consisting of medical care described in 
                section 607(1) of the Employee Retirement Income 
                Security Act of 1974; and
                    (D) a State, or the Federal Government, acting in a 
                capacity as a provider of health benefits to eligible 
                individuals that is equivalent to that of a carrier.
            (11) Standard.--The term ``standard'', when used with 
        reference to a transaction or to data elements of health 
        information, means that the transaction or data elements meet 
        any standard adopted by the Secretary under part 1 that applies 
        to the transaction or data elements.
          PART 1--STANDARDS FOR DATA ELEMENTS AND TRANSACTIONS

SEC. 5011. GENERAL REQUIREMENTS ON SECRETARY.

    (a) In General.--The Secretary shall adopt standards and 
modifications to standards under this part 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, developed, or modified 
        by the standard-setting organizations accredited by the 
        American National Standard Institute.
    (b) Initial Standards.--The Secretary may develop an expedited 
process for the adoption of initial standards under this part.
    (c) Protection of Commercial Information.--In adopting standards 
under this part, the Secretary may not require disclosure of trade 
secrets or confidential commercial information by any person.

SEC. 5012. STANDARDS FOR DATA ELEMENTS OF HEALTH INFORMATION.

    (a) In General.--The Secretary shall adopt standards necessary to 
make uniform and compatible for electronic transmission through the 
health information network the data elements of any health information 
that the Secretary determines is appropriate for transmission in 
connection with a transaction described in section 5021.
    (b) Additions.--The Secretary may make additions to any set 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, plan sponsor, and 
        health provider for use in the health care system.
            (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 code sets.

SEC. 5013. INFORMATION TRANSACTION STANDARDS.

    (a) In General.--The Secretary shall adopt technical standards that 
are consistent with the health information network privacy standards 
adopted under section 5014 relating to the method by which standard 
data elements of health information may be transmitted electronically, 
including standards with respect to the format in which such data 
elements may be transmitted.
    (b) Special Rule for Coordination of Benefits.--Any standard 
adopted by the Secretary under paragraph (1) that relates to 
coordination of benefits shall provide that a claim for reimbursement 
for health services furnished shall be tested, by an algorithm 
specified by the Secretary, against all records of enrollment and 
eligibility for the individual who received such services that are 
available to the recipient of the claim through the health information 
network 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 shall be deemed to satisfy State and 
Federal statutory requirements for written signatures with respect to 
transactions described in section 5021 and written signatures on health 
records and prescriptions.
    (d) Standards for Claims for Clinical Laboratory Tests.--The 
standards under this section shall provide that claims for clinical 
laboratory tests for which benefits are payable by a plan sponsor shall 
be submitted directly by the person or entity that performed (or 
supervised the performance of) the tests to the sponsor in a manner 
consistent with (and subject to such exceptions as are provided under) 
the requirement for direct submission of such claims under the medicare 
program.

SEC. 5014. HEALTH INFORMATION NETWORK PRIVACY STANDARDS.

    The Secretary shall adopt standards respecting the privacy of 
individually identifiable health information that is in the health 
information network. Such standards shall include standards concerning 
at least the following:
            (1) The rights of an individual who is the subject of such 
        information.
            (2) The procedures to be established for the exercise of 
        such rights.
            (3) The uses and disclosures of such information that are 
        authorized or required.
            (4) Safeguards for the security of such information and 
        adequate security practices.

SEC. 5015. 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 5012(a) not later than 9 months after the date of the 
        enactment of this Act (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 Act); and
            (2) any addition to a set of data elements, in conjunction 
        with making such an addition.
    (b) Initial Privacy Standards.--The Secretary shall adopt standards 
relating to the privacy of individually identifiable health information 
in the health information network under section 5014 not later than 12 
months after the date of the enactment of this Act.
    (c) Initial Standards for Information Transactions.--The Secretary 
shall adopt standards relating to information transactions under 
section 5013 not later than 18 months after the date of the enactment 
of this Act (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 Act).
    (d) 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 not more frequently than once every 6 months. Any 
        modification to standards shall be completed in a manner which 
        minimizes the disruption to, and costs of compliance incurred 
        by, a plan sponsor, health provider, or health plan purchasing 
        organization that is required to comply with part 2.
            (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 may not 
                adopt any modification to a standard adopted under this 
                part during the 12-month period beginning on the date 
                the standard is adopted, unless the Secretary 
                determines that the modification is necessary in order 
                to permit a plan sponsor, a health provider, or a 
                health plan purchasing organization to comply with part 
                2.
                    (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.
                            (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 to, and 
                        costs of compliance incurred by, a plan 
                        sponsor, health provider, or health plan 
                        purchasing organization that is required to 
                        comply with part 2.
    (e) Evaluation of Standards.--The Secretary may establish a process 
to measure or verify the consistency of standards adopted or modified 
under this part. Such process may include demonstration projects and 
analyses of the cost of implementing such standards and modifications.

     PART 2--REQUIREMENTS WITH RESPECT TO CERTAIN TRANSACTIONS AND 
                              INFORMATION

SEC. 5021. STANDARD TRANSACTIONS AND INFORMATION.

    (a) Transactions by Sponsors.--
            (1) Transactions with providers.--If a plan sponsor 
        conducts any of the transactions described in paragraph (3) 
        with a health provider--
                    (A) the transaction shall be a standard 
                transaction; and
                    (B) the health information transmitted by the 
                sponsor to the provider or by the provider to the 
                sponsor in connection with the transaction shall be in 
                the form of standard data elements.
            (2) Transactions with sponsors.--If a plan sponsor conducts 
        any of the transactions described in paragraph (3) with another 
        plan sponsor--
                    (A) the transaction shall be a standard 
                transaction; and
                    (B) the health information transmitted by either 
                sponsor in connection with the transaction shall be in 
                the form of standard data elements.
            (3) Transactions.--The transactions referred to in 
        paragraphs (1) and (2) are the following:
                    (A) Verification of eligibility for benefits.
                    (B) Coordination of benefits.
                    (C) Claim submission.
                    (D) Claim attachment submission.
                    (E) Claim status notification.
                    (F) Claim status verification.
                    (G) Claim adjudication.
                    (H) Payment and remittance advice.
                    (I) Certification or authorization of a referral to 
                a health provider who is not part of a provider 
                network.
    (b) Use of Health Information Network Services.--A plan sponsor, a 
health provider, or a health plan purchasing organization may comply 
with any provision of this section by entering into an agreement or 
other arrangement with a health information network service certified 
under section 5031 pursuant to which the service undertakes the duties 
applicable to the sponsor, provider, or organization under the 
provision.
SEC. 5022. ACCESSING HEALTH INFORMATION FOR AUTHORIZED PURPOSES.

    (a) Procurement Rule for Government Agencies.--
            (1) In general.--A health information security organization 
        that is certified under section 5031 shall make available to a 
        Federal or State agency, pursuant to a cost-type contract (as 
        defined under the Federal Acquisition Regulation), any non-
        identifiable health information, including non-identifiable 
        health information that is derived from individually 
        identifiable health information, that--
                    (A) is held by the service or may be obtained by 
                the service under paragraph (2) or subsection (b);
                    (B) consists of data elements that are subject to a 
                standard under part 1; and
                    (C) is requested by the agency to fulfill a 
                requirement under this Act.
            (2) Certain information available at low cost.--If a health 
        information security organization requires health information 
        consisting of data elements that are subject to a standard 
        under part 1 from a plan sponsor or a health provider in order 
        to comply with a request made by a Federal or State agency 
        under paragraph (1), the sponsor or provider shall make such 
        information available to such organization for a charge that 
        does not exceed the reasonable cost of transmitting the 
        information.
    (b) Procurement Rule for Information Security Organizations.--A 
health information security organization that makes non-identifiable 
health information available to a Federal or State agency under 
subsection (a) shall make such non-identifiable information available, 
for a charge that does not exceed the reasonable cost of transmitting 
the information, to any other health information security organization 
that--
            (A) is certified under section 5031; and
            (B) requests the information.

SEC. 5023. ENSURING AVAILABILITY OF INFORMATION.

    The Secretary shall establish a procedure under which a plan 
sponsor or health provider that does not have the ability to transmit 
standard data elements directly, and does not have access to a health 
information network service certified under section 5031, may comply 
with the provisions of this part.

SEC. 5024. 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 1 with respect to a type 
        of transaction, or data elements for a type of health 
        information, a plan sponsor, health provider, or health plan 
        purchasing organization shall comply with the requirements of 
        this part 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 section 5012, 
        a plan sponsor, health provider, or health plan purchasing 
        organization shall comply with the requirements of this part 
        using such data elements.
    (b) Compliance With Modified Standards.--
            (1) In general.--If the Secretary adopts a modified 
        standard under section 5015(c), a plan sponsor, health 
        provider, or health plan purchasing organization shall 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 a modification to a 
        standard that does not occur within the 12-month period 
        beginning on the date the standard is adopted, the time 
        determined appropriate by the Secretary under paragraph (1) may 
        not be--
                    (A) earlier than the last day of the 90-day period 
                beginning on the date the modified standard is adopted; 
                or
                    (B) later than the last day of the 12-month period 
                beginning on the date the modified standard is adopted.

                    PART 3--MISCELLANEOUS PROVISIONS

SEC. 5031. 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 such services--
            (1) develop, operate, and cooperate with one another to 
        form the health information network;
            (2) meet all of the standards adopted under part 1 that are 
        applicable to the services;
            (3) 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; and
            (4) 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 18 months after the date 
        of the enactment of this Act, 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 and 
        the standards established by the Secretary under this section.
            (4) Recertification.--A health information network service 
        shall be recertified under this subsection at least every 3 
        years.
    (c) Loss of Certification.--
            (1) Mandatory termination.--Except as provided in paragraph 
        (2), if a health information network service violates a health 
        information network privacy standard adopted under section 5014 
        that is applicable to the service, its certification under this 
        section shall be terminated unless the Secretary determines 
        that appropriate corrective action has been taken.
            (2) 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 paragraph (1). 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.
    (e) Information Held by Health Information Network Services.--If a 
health information network service certified under this section 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 this section that has been designated by the Secretary.

SEC. 5032. IMPOSITION OF ADDITIONAL REQUIREMENTS.

    (a) In General.--Except as provided in subsection (c), after the 
Secretary has established standards under section 5012 that are 
necessary to make uniform and compatible for electronic transmission 
the data elements that the Secretary determines are appropriate for 
transmission in connection with a transaction described in part 2, an 
individual or entity may not require an individual or entity, to 
provide in any manner any additional data element in connection with--
            (1) the transaction; or
            (2) an inquiry with respect to the transaction.
    (b) Transmission Method.--Except as provided in subsection (c), 
after the Secretary has established standards under section 5013 
relating to the method by which data elements that the Secretary 
determines are appropriate for transmission in connection with a 
transaction described in part 2 may be transmitted electronically, an 
individual or entity may not require an individual or entity to 
transmit any data element in a manner inconsistent with the standards 
in connection with--
            (1) the transaction; or
            (2) an inquiry with respect to the transaction.
    (c) Exception.--Subsections (a) and (b) do not apply if--
            (1) an individual or entity voluntarily agrees to provide 
        the additional data element; or
            (2) a waiver is granted under subsection (d) to permit the 
        requirement to be imposed.
    (d) Conditions for Waivers.--
            (1) In general.--An individual or entity may request a 
        waiver from the Secretary in order to impose on an individual 
        or entity a requirement otherwise prohibited under subsection 
        (a) or (b). Subject to paragraph (2), the Secretary may grant 
        such a waiver.
            (2) Consideration of waiver requests.--A waiver may not be 
        granted under this subsection to impose an otherwise prohibited 
        requirement unless the Secretary determines that the value of 
        any additional information to be provided under the requirement 
        for research or other purposes significantly outweighs the 
        administrative cost of the imposition of the requirement, 
        taking into account the burden of the timing of the imposition 
        of the requirement.
    (e) Anonymous Reporting.--If an individual or entity attempts to 
impose on an individual or entity a requirement prohibited under 
subsection (a) or (b), the individual or entity on whom the requirement 
is being imposed may contact the Secretary. The Secretary shall develop 
a procedure under which an individual or entity that contacts the 
Secretary under the preceding sentence shall remain anonymous. The 
Secretary shall notify the individual or entity imposing the 
requirement that the requirement may not be imposed unless the other 
individual or entity voluntarily agrees to such requirement or a waiver 
is obtained under subsection (d).

SEC. 5033. EFFECT ON STATE LAW.

    (a) In General.--Except as otherwise provided in this section, a 
provision, requirement, or standard under this subtitle shall supersede 
any contrary provision of State law.
    (b) State ``Quill and Pen'' Laws.--A State may not establish, 
continue in effect, or enforce any 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, 
except where the Secretary determines that the provision is necessary 
to prevent fraud and abuse, with respect to controlled substances, or 
for other purposes.
    (c) 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.
    (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.
    (e) Payment for Health Care Services or Premiums.--Nothing in this 
subtitle shall be construed to prohibit a consumer from paying for 
health care items or
 services, or plan or health insurance coverage premiums, by debit, 
credit, or other payment cards or numbers or other electronic payment 
means.
                         Subtitle B--Antitrust
                                                    Title V, Subtitle B
SEC. 5101. PUBLICATION OF ANTITRUST GUIDELINES ON ACTIVITIES OF HEALTH 
              PLANS.

    (a) In General.--The Attorney General shall provide for the 
development and publication of explicit guidelines on the application 
of antitrust laws to the activities of health plans. The guidelines 
shall be designed to facilitate development and operation of plans, 
consistent with the antitrust laws.
    (b) Review Process.--The Attorney General shall establish a review 
process under which the administrator or sponsor of a health plan (or 
organization that proposes to administer or sponsor a health plan) may 
submit a request to the Attorney General to obtain a prompt opinion 
(but in no event later than 90 days after the Attorney General receives 
the request) from the Department of Justice on the plan's conformity 
with the Federal antitrust laws.
    (c) Definitions.--In this section--
            (1) the term ``antitrust laws''--
                    (A) has the meaning given it in subsection (a) of 
                the first section of the Clayton Act (15 U.S.C. 12(a)), 
                except that such term includes section 5 of the Federal 
                Trade Commission Act (15 U.S.C. 45) to the extent such 
                section applies to unfair methods of competition, and
                    (B) includes any State law similar to the laws 
                referred to in subparagraph (A); and
            (2) the term ``health plan'' means any contract or 
        arrangement under which an entity bears all or part of the cost 
        of providing health care items and services, including a 
        hospital or medical expense incurred policy or certificate, 
        hospital or medical service plan contract, or health 
        maintenance subscriber contract, but does not include--
                    (A) coverage only for accident, dental, vision, 
                disability, or long term care, medicare supplemental 
                health insurance, or any combination thereof,
                    (B) coverage issued as a supplement to liability 
                insurance,
                    (C) workers' compensation or similar insurance, or
                    (D) automobile medical-payment insurance.

SEC. 5102. ISSUANCE OF HEALTH CARE CERTIFICATES OF PUBLIC ADVANTAGE.

    (a) Issuance and Effect of Certificate.--The Attorney General, 
after consultation with the Secretary, shall issue in accordance with 
this section a certificate of public advantage to each eligible health 
care collaborative activity that complies with the requirements in 
effect under this section on or after the expiration of the 1-year 
period that begins on the date of the enactment of this Act (without 
regard to whether or not the Attorney General has promulgated 
regulations to carry out this section by such date). Such activity, and 
the parties to such activity, shall not be liable under any of the 
antitrust laws for conduct described in such certificate and engaged in 
by such activity if such conduct occurs while such certificate is in 
effect.
    (b) Requirements Applicable to Issuance of Certificates.--
            (1) Standards to be met.--The Attorney General shall issue 
        a certificate to an eligible health care collaborative activity 
        if the Attorney General finds that--
                    (A) the benefits that are likely to result from 
                carrying out the activity outweigh the reduction in 
                competition (if any) that is likely to result from the 
                activity, and
                    (B) such reduction in competition is necessary to 
                obtain such benefits.
            (2) Factors to be considered.--
                    (A) Weighing of benefits against reduction in 
                competition.--For purposes of making the finding 
                described in paragraph (1)(A), the Attorney General 
                shall consider whether the activity is likely--
                            (i) to maintain or to increase the quality 
                        of health care by providing new services not 
                        currently offered in the relevant market,
                            (ii) to increase access to health care,
                            (iii) to achieve cost efficiencies that 
                        will be passed on to health care consumers, 
                        such as economies of scale, reduced transaction 
                        costs, and reduced administrative costs, that 
                        cannot be achieved by the provision of 
                        available services and facilities in the 
                        relevant market,
                            (iv) to preserve the operation of health 
                        care facilities located in underserved 
                        geographical areas,
                            (v) to improve utilization of health care 
                        resources, and
                            (vi) to reduce inefficient health care 
                        resource duplication.
                    (B) Necessity of reduction in competition.--For 
                purposes of making the finding described in paragraph 
                (1)(B), the Attorney General shall consider--
                            (i) the ability of the providers of health 
                        care services that are (or likely to be) 
                        affected by the health care collaborative 
                        activity and the entities responsible for 
                        making payments to such providers to negotiate 
                        societally optimal payment and service 
                        arrangements,
                            (ii) the effects of the health care 
                        collaborative activity on premiums and other 
                        charges imposed by the entities described in 
                        clause (i), and
                            (iii) the availability of equally 
                        efficient, less restrictive alternatives to 
                        achieve the benefits that are intended to be 
                        achieved by carrying out the activity.
    (c) Establishment of Criteria and Procedures.--Subject to 
subsections (d) and (e), not later than 1 year after the date of the 
enactment of this Act, the Attorney General and the Secretary shall 
establish jointly by rule the criteria and procedures applicable to the 
issuance of certificates under subsection (a). The rules shall specify 
the form and content of the application to be submitted to the Attorney 
General to request a certificate, the information required to be 
submitted in support of such application, the procedures applicable to 
denying and to revoking a certificate, and the procedures applicable to 
the administrative appeal (if such appeal is authorized by rule) of the 
denial and the revocation of a certificate. Such information may 
include the terms of the health care collaborative activity (in the 
case of an activity in existence as of the time of the application) and 
implementation plan for the collaborative activity.
    (d) Eligible Health Care Collaborative Activity.--To be an eligible 
health care collaborative activity for purposes of this section, a 
health care collaborative activity shall submit to the Attorney General 
an application that complies with the rules in effect under subsection 
(c) and that includes--
            (1) an agreement by the parties to the activity that the 
        activity will not foreclose competition by entering into 
        contracts that prevent health care providers from providing 
        health care in competition with the activity,
            (2) an agreement that the activity will submit to the 
        Attorney General annually a report that describes the 
        operations of the activity and information regarding the impact 
        of the activity on health care and on competition in health 
        care, and
            (3) an agreement that the parties to the activity will 
        notify the Attorney General and the Secretary of the 
        termination of the activity not later than 30 days after such 
        termination occurs.
    (e) Review of Applications for Certificates.--Not later than 90 
days after an eligible health care collaborative activity submits to 
the Attorney General an application that complies with the rules in 
effect under subsection (c) and with subsection (d), the Attorney 
General shall issue or deny the issuance of such certificate. If, 
before the expiration of such 90-day period, the Attorney General may 
extend the time for issuance for good cause.
    (f) Revocation of Certificate.--Whenever the Attorney General finds 
that a health care collaborative activity with respect to which a 
certificate is in effect does not meet the standards specified in 
subsection (b), the Attorney General shall revoke such certificate.
    (g) Written Reasons; Judicial Review.--
            (1) Denial and revocation of certificates.--If the Attorney 
        General denies an application for a certificate or revokes a 
        certificate, the Attorney General shall include in the notice 
        of denial or revocation a statement of the reasons relied upon 
        for the denial or revocation of such certificate.
            (2) Judicial review.--
                    (A) After administrative proceeding.--(i) If the 
                Attorney General denies an application submitted or 
                revokes a certificate issued under this section after 
                an opportunity for hearing on the record, then any 
                party to the health care collaborative activity 
                involved may commence a civil action, not later than 60 
                days after receiving notice of the denial or 
                revocation, in an appropriate district court of the 
                United States for review of the record of such denial 
                or revocation.
                    (ii) As part of the Attorney General's answer, the 
                Attorney General shall file in such court a certified 
                copy of the record on which such denial or revocation 
                is based. The findings of fact of the Attorney General 
                may be set aside only if found to be unsupported by 
                substantial evidence in such record taken as a whole.
                    (B) Denial or revocation without administrative 
                proceeding.--If the Attorney
                 General denies an application submitted or revokes a 
certificate issued under this section without an opportunity for 
hearing on the record, then any party to the health care collaborative 
activity involved may commence a civil action, not later than 60 days 
after receiving notice of the denial or revocation, in an appropriate 
district court of the United States for de novo review of such denial 
or revocation.
    (h) Exemption.--A person shall not be liable under any of the 
antitrust laws for conduct necessary--
            (1) to prepare, agree to prepare, or attempt to agree to 
        prepare an application to request a certificate under this 
        section, or
            (2) to attempt to enter into any health care collaborative 
        activity with respect to which such a certificate is in effect.
    (i) Definitions.--In this section:
            (1) The term ``antitrust laws'' has the meaning given it in 
        section 5101(c)(1).
            (2) The term ``certificate'' means a certificate of public 
        advantage authorized to be issued under subsection (a).
            (3) The term ``health care collaborative activity'' means 
        an agreement (whether existing or proposed) between 2 or more 
        providers of health care services that is entered into solely 
        for the purpose of sharing in the provision and coordination of 
        health care services and that involves substantial integration 
        and financial risk-sharing between the parties, but does not 
        include the exchanging of information, the entering into of any 
        agreement, or the engagement in any other conduct that is not 
        reasonably required to carry out such agreement.
            (4) The term ``health care services'' includes services 
        related to the delivery or administration of health care 
        services.
            (5) The term ``liable'' means liable for any civil or 
        criminal violation of the antitrust laws.
            (6) The term ``provider of health care services'' means any 
        individual or entity that is engaged in the delivery of health 
        care services in a State and that is required by State law or 
        regulation to be licensed or certified by the State to engage 
        in the delivery of such services in the State.

SEC. 5103. STUDY OF IMPACT ON COMPETITION.

    The Attorney General, in consultation with the Chairman of the 
Federal Trade Commission, annually shall submit to the Congress a 
report as part of the annual budget oversight proceedings concerning 
the Antitrust Division of
 the Department of Justice. The report shall enable the Congress to 
determine how enforcement of antitrust laws is affecting the formation 
of efficient, cost-saving joint ventures and if the certificate of 
public advantage procedure set forth in section 5102 has resulted in 
undesirable reduction in competition in the health care marketplace. 
The report shall include an evaluation of the factors set forth in 
paragraphs (2)(A) and (2)(B) of section 5102(b).
                           TITLE VI--MEDICARE

 Subtitle A--Increased Beneficiary Choice; Improved Program Efficiency
                                                   Title VI, Subtitle A
                  PART 1--INCREASED BENEFICIARY CHOICE

SEC. 6001. REQUIREMENTS FOR HEALTH MAINTENANCE ORGANIZATIONS UNDER 
              MEDICARE.

    (a) Use of Metropolitan Statistical Areas to Determine Adjusted 
Average Per Capita Cost.--Section 1876(a)(4) of the Social Security Act 
(42 U.S.C. 1395mm(a)(4)) is amended by striking ``in a geographic area 
served by an eligible organization or in a similar area'' and inserting 
``in the metropolitan statistical area (as defined by the Office of 
Management and Budget) in which the individual resides, or in the 
entire portion of the State in which the individual resides which is 
not located in a metropolitan statistical area in the case of an 
individual who does not reside in a metropolitan statistical area''.
    (b) Determination of Model Additional Health Benefit Packages.--
Section 1876(g) of such Act (42 U.S.C. 1395mm(g)) is amended by 
inserting after paragraph (3) the following new paragraph:
    ``(4) The Secretary shall develop the following model packages of 
additional health benefits (referred to in paragraph (3)(B)) which an 
eligible organization may provide (at its option) under paragraph (2):
            ``(A) Coverage for catastrophic illness (subject to a limit 
        on out-of-pocket expenditures).
            ``(B) Coverage for prescription drugs.
            ``(C) Coverage for preventive services.''.
    (c) Revision of Membership Limitation.--Section 1876(f) of such Act 
(42 U.S.C. 1395mm(f)) is amended--
            (1) in paragraph (1), by striking ``one-half'' and 
        inserting ``25 percent''; and
            (2) in paragraph (2)(A), by striking ``50 percent'' and 
        inserting ``75 percent''.
    (d) Enrollment Periods for Medicare Health Maintenance 
Organizations.--
            (1) Uniform open enrollment period.--Section 
        1876(c)(3)(A)(i) of such Act (42 U.S.C. 1395mm(c)(3)(A)(i)) is 
        amended by striking ``must have'' and all that follows through 
        ``and including'' and inserting the following: ``shall have 
        open enrollment during an annual uniform open enrollment period 
        established by the Secretary for all eligible organizations, 
        together with''.
            (2) Open enrollment for certain disenrolled individuals.--
        Section 1876(c)(3)(A)(ii)(I) of such Act (42 U.S.C. 
        1395mm(c)(3)(A)(ii)(I)) is amended by adding at the end the 
        following: ``Each eligible organization with a risk-sharing 
        contract under this section shall have an open enrollment 
        period for individuals residing in the organization's service 
        area who disenroll from another eligible organization with a 
        risk-sharing contract under this section on the grounds that 
        the individual's primary care physician is no longer a member 
        of the organization's provider network or for cause (in 
        accordance with such standards, and as demonstrated through an 
        appeals process that meets such requirements, as the Secretary 
        may establish).
    (e) Effective Date.--The amendments made by this section shall 
apply to contracts entered into on or after the date of the enactment 
of this Act.

SEC. 6002. EXPANSION AND REVISION OF MEDICARE SELECT POLICIES.

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

SEC. 6003. INCLUDING NOTICE OF AVAILABLE HEALTH MAINTENANCE 
              ORGANIZATIONS IN ANNUAL NOTICE TO BENEFICIARIES.

    Section 1804 of the Social Security Act (42 U.S.C. 1395b-2) is 
amended--
            (1) by striking ``and'' at the end of paragraph (2);
            (2) by striking the period at the end of paragraph (3) and 
        inserting ``, and''; and
            (3) by inserting after paragraph (3) the following new 
        paragraph:
            ``(4) with respect to the area in which the individual 
        receiving the notice resides, a description of the eligible 
        organizations under section 1833(a)(1) or section 1876 and the 
        carriers offering a medicare supplemental policy described in 
        section 1882(t)(1) which serve the area in which the individual 
        receiving the notice resides.''.
SEC. 6004. LEGISLATIVE PROPOSAL ON ENROLLING MEDICARE BENEFICIARIES IN 
              QUALIFIED HEALTH PLANS.

    (a) In General.--
            (1) Legislative proposal.--Not later than 1 year after the 
        date of the enactment of this Act, the Secretary shall develop 
        and submit to Congress a proposal for legislation which 
        provides for the voluntary enrollment of medicare beneficiaries 
        in private health insurance plans.
            (2) Medicare beneficiary.--For purposes of this section, 
        the term ``medicare beneficiary'' means an individual who is 
        eligible for benefits under part A of title XVIII of the Social 
        Security Act and is enrolled under part B of such title.
    (b) Contents of the Proposal.--A proposal for legislation submitted 
under subsection (a) shall--
            (1) provide for an appropriate methodology by which the 
        Secretary shall make payment to private health insurance plans 
        for the enrollment of medicare beneficiaries;
            (2) provide individuals the opportunity to remain enrolled 
        in such a plan without an interruption in coverage upon 
        becoming medicare beneficiaries; and
            (3) provide medicare beneficiaries with the opportunity to 
        enroll in a private health insurance plan.

SEC. 6005. OPTIONAL INTERIM ENROLLMENT OF MEDICARE BENEFICIARIES IN 
              PRIVATE HEALTH PLANS.

    (a) Interim Enrollment of Medicare Beneficiaries in Qualified 
Health Plans.--
            (1) In general.--Notwithstanding title XVIII of the Social 
        Security Act, the Secretary shall provide for a monthly payment 
        as provided under subsection (b)(1) to a private health 
        insurance plan on behalf of enrolled medicare beneficiaries who 
        choose to enroll in such a plan.
            (2) Medicare beneficiary.--For purposes of this section, 
        the term ``medicare beneficiary'' means an individual who is 
        eligible for benefits under part A of title XVIII of the Social 
        Security Act and is enrolled under part B of such title.
    (b) Payment Specified.--
            (1) Federal payment.--
                    (A) In general.--The amount of payment specified in 
                this paragraph for an individual who is enrolled in a 
                private health insurance plan is the lesser of--
                            (i) the applicable rate specified in 
                        section 1876(a)(1)(C) of the Social Security 
                        Act; or
                            (ii) the monthly premium charged the 
                        individual for coverage under the private 
                        health insurance plan.
                    (B) Source of payment.--The payment to a private 
                health insurance plan under this paragraph for 
                individuals entitled to benefits under part A and 
                enrolled under part B of title XVIII of the Social 
                Security Act shall be made from the Federal Hospital 
                Insurance Trust Fund and the Federal Supplementary 
                Medical Insurance Trust Fund, with the allocation to be 
                determined by the Secretary.
            (2) Individual's share.--If the monthly premium for the 
        private plan in which the individual is enrolled is greater 
        than the amount specified under paragraph (1)(A)(i), the 
        individual shall be responsible for paying to the plan the 
        difference between the monthly premium charged the individual 
        for coverage under the plan and the amount specified in 
        paragraph (1)(A)(i).
            (3) Budget-neutrality.--The total amount of payments made 
        by the Secretary under this section with respect to a 
        beneficiary for a year may not exceed the amount of payment 
        that would have been made under title XVIII of the Social 
        Security Act during the year if the beneficiary did not choose 
        to enroll in a private health insurance plan during the year.
    (c) Payments Under This Section as Sole Medicare Benefits.--
Payments made under this section shall be instead of the amounts that 
would otherwise be payable, pursuant to sections 1814(b) and 1833(a) of 
the Social Security Act, for services furnished to medicare 
beneficiaries.
    (d) Inclusion in Annual Notice to Beneficiaries.--Section 1804 of 
the Social Security Act (42 U.S.C. 1395b-2), as amended by section 
6003, is amended--
            (1) by striking ``and'' at the end of paragraph (3);
            (2) by striking the period at the end of paragraph (4) and 
        inserting ``, and''; and
            (3) by inserting after paragraph (4) the following new 
        paragraph:
            ``(5) a description of the option provided pursuant to 
        section 6005 of the Health Care Improvement Act of 1995 for 
        payment to be made by the Secretary on the individual's behalf 
        for enrollment in a private health insurance plan.''.

                  PART 2--IMPROVED PROGRAM EFFICIENCY

SEC. 6011. IMPROVED EFFICIENCY THROUGH CONSOLIDATION OF ADMINISTRATION 
              OF PARTS A AND B.

    (a) In General.--The Secretary of Health and Human Services shall 
take such steps as may be necessary to consolidate the administration 
(including processing systems) of parts A and B of the medicare program 
(under title XVIII of the Social Security Act) over a 4-year period.
    (b) Combination of Intermediary and Carrier Functions.--In taking 
such steps, the Secretary shall contract with a single entity that 
combines the fiscal intermediary and carrier functions in each area 
except where the Secretary finds that special regional or national 
contracts are appropriate.
    (c) Superseding Conflicting Requirements.--The provisions of 
sections 1816 and 1842 of the Social Security Act (including provider 
nominating provisions in such section 1816) are superseded to the 
extent required to carry out this section.

               PART 3--NOTICE OF ADVANCE DIRECTIVE RIGHTS

SEC. 6021. PROVIDING NOTICE OF RIGHTS REGARDING MEDICAL CARE TO 
              INDIVIDUALS ENTERING MEDICARE.

    (a) In General.--Section 1804 of the Social Security Act (42 U.S.C. 
1395b-2) is amended--
            (1) in paragraph (2), by striking ``and'' at the end;
            (2) in paragraph (3), by striking the period at the end and 
        inserting ``, and''; and
            (3) by inserting after paragraph (3) the following new 
        paragraph:
            ``(4) a description of an individual's rights under State 
        law to make decisions concerning medical care, including the 
        right to accept or refuse medical or surgical treatment and the 
        right to formulate advance directives (as defined in section 
        1866(f)(3)).''.
    (b) Effective Date.--The amendments made by subsection (a) shall 
apply to notices provided under section 1804 of the Social Security Act 
on or after January 1 of the first year beginning after the date of the 
enactment of this Act.
                          Subtitle B--Savings
                                                   Title VI, Subtitle B
SEC. 6101. REDUCTION IN CONVERSION FACTOR FOR PHYSICIAN FEE SCHEDULE 
              FOR NON-PRIMARY CARE SERVICES.

    Section 1848(d)(3)(A) of the Social Security Act (42 U.S.C. 1395w-
4(d)(3)(A)) is amended--
            (1) in clause (i), by striking ``through (v)'' and 
        inserting ``through (vi)'';
            (2) in clause (vi), by striking ``(iv) and (v)'' and 
        inserting ``(iv), (v), and (vi)'';
            (3) by redesignating clause (vi) as clause (vii); and
            (4) by inserting after clause (v) the following new clause:
                            ``(vi) Adjustment in percentage increase 
                        for years from 1998 through 2001.--In applying 
                        clause (i) for services furnished during the 
                        period beginning January 1, 1998, and ending 
                        December 31, 2001, the percentage increase in 
                        the appropriate update index shall be reduced 
                        by such percent as the Secretary determines 
                        will result in a reduction in aggregate 
                        payments for physicians' services under this 
                        part during such period of at least 
                        $6,300,000,000 from the amount of aggregate 
                        payments for such services that would otherwise 
                        have been made during the period.''.

SEC. 6102. REDUCTION IN HOSPITAL OUTPATIENT SERVICES THROUGH 
              ESTABLISHMENT OF PROSPECTIVE PAYMENT SYSTEM.

    (a) In General.--Section 1833(a)(2)(B) of the Social Security Act 
(42 U.S.C. 1395l(a)(2)(B)) is amended by striking ``section 1886)--'' 
and all that follows and inserting the following: ``section 1886), an 
amount equal to a prospectively determined payment rate established by 
the Secretary that provides for payments for such items and services to 
be based upon a national rate adjusted to take into account the 
relative costs of furnishing such items and services in various 
geographic areas, except that for items and services furnished during 
cost reporting periods (or portions thereof) in years beginning with 
1997, such amount shall be equal to 90 percent of the amount that would 
otherwise have been determined;''.
    (b) Establishment of Prospective Payment System.--Not later than 
July 1, 1996, the Secretary of Health and Human Services shall 
establish the prospective payment system for hospital outpatient 
services necessary to carry out section 1833(a)(2)(B) of the Social 
Security Act (as amended by subsection (a)).
    (c) Effective Date.--The amendment made by subsection (a) shall 
apply to items and services furnished on or after January 1, 1997.

SEC. 6103. INCREASE IN MEDICARE PART B PREMIUM FOR INDIVIDUALS WITH 
              HIGH INCOME.

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

   ``PART VIII--MEDICARE PART B PREMIUMS FOR HIGH-INCOME INDIVIDUALS
                              ``Sec. 49B. Medicare part B premium tax.
``SEC. 59B. MEDICARE PART B PREMIUM TAX.

    ``(a) Imposition of Tax.--In the case of an individual to whom this 
section applies for the taxable year, there is hereby imposed (in 
addition to any other tax imposed by this subtitle) a tax for such 
taxable year equal to the aggregate of the Medicare part B premium 
taxes for each of the months during such year that such individual is 
covered by Medicare part B.
    ``(b) Individuals to Whom Section Applies.--This section shall 
apply to any individual for any taxable year if--
            ``(1) such individual is covered under Medicare part B for 
        any month during such year, and
            ``(2) the modified adjusted gross income of the taxpayer 
        for such taxable year exceeds the threshold amount.
    ``(c) Medicare Part B Premium Tax for Month.--
            ``(1) In general.--The Medicare part B premium tax for any 
        month is the applicable percentage (as defined in paragraph 
        (2)) of the amount equal to the excess of--
                    ``(A) 150 percent of the monthly actuarial rate for 
                enrollees age 65 and over determined for that calendar 
                year under section 1839(b) of the Social Security Act, 
                over
                    ``(B) the total monthly premium under section 1839 
                of the Social Security Act (determined without regard 
                to subsections (b) and (f) of section 1839 of such 
                Act).
            ``(2) Phase-in of tax.--If the modified adjusted gross 
        income of the taxpayer for any taxable years exceeds the 
        threshold amount by--
                    ``(A) less than $25,000, the applicable percentage 
                under this paragraph is 33 percent;
                    ``(B) at least $25,000, but less than $50,000, the 
                applicable percentage under this paragraph is 66 
                percent,
                    ``(C) at least $50,000, but less than $75,000, the 
                applicable percentage under this paragraph is 75 
                percent, or
                    ``(D) at least $75,000, the applicable percentage 
                under this paragraph is 100 percent.
    ``(d) Other Definitions and Special Rules.--For purposes of this 
section--
            ``(1) Threshold amount.--The term `threshold amount' 
        means--
                    ``(A) except as otherwise provided in this 
                paragraph, $75,000,
                    ``(B) $100,000 in the case of a joint return, and
                    ``(C) zero in the case of a taxpayer who--
                            ``(i) is married at the close of the 
                        taxable year but does not file a joint return 
                        for such year, and
                            ``(ii) does not live apart from his spouse 
                        at all times during the taxable year.
            ``(2) Modified adjusted gross income.--The term `modified 
        adjusted gross income' means adjusted gross income--
                    ``(A) determined without regard to sections 135, 
                911, 931, and 933, and
                    ``(B) increased by the amount of interest received 
                or accrued by the taxpayer during the taxable year 
                which is exempt from tax.
            ``(3) Medicare part b coverage.--An individual shall be 
        treated as covered under Medicare part B for any month if a 
        premium is paid under part B of title XVIII of the Social 
        Security Act for the coverage of the individual under such part 
        for the month.
            ``(4) Married individual.--The determination of whether an 
        individual is married shall be made in accordance with section 
        7703.''.
    (b) Clerical Amendment.--The table of parts for subchapter A of 
chapter 1 of such Code is amended by adding at the end thereof the 
following new item:

                              ``Part VIII. Medicare Part B Premiums For 
                                        High-Income Individuals.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to months after December 1995 in taxable years ending after 
December 31, 1995.

SEC. 6104. PHASED-IN ELIMINATION OF MEDICARE HOSPITAL DISPROPORTIONATE 
              SHARE ADJUSTMENT PAYMENTS.

    Section 1886(d)(5)(F) of the Social Security Act (42 U.S.C. 
1395ww(d)(5)(F)) is amended--
            (1) in clause (i), by inserting ``and before September 30, 
        2000,'' after ``1986,'';
            (2) in clause (ii), by striking ``The amount of such 
        payment'' and inserting ``Subject to clause (ix), the amount of 
        such payment''; and
            (3) by adding at the end the following new clause:
    ``(ix) The amount of the additional payment made under this 
paragraph for a discharge shall be equal to--
            ``(I) for discharges occurring during fiscal year 1997, 80 
        percent of the amount otherwise determined for the discharge 
        under clause (ii);
            ``(II) for discharges occurring during fiscal year 1998, 60 
        percent of the amount otherwise determined for the discharge 
        under clause (ii);
            ``(III) for discharges occurring during fiscal year 1999, 
        40 percent of the amount otherwise determined for the discharge 
        under clause (ii); and
            ``(IV) for discharges occurring during fiscal year 2000, 20 
        percent of the amount otherwise determined for the discharge 
        under clause (ii).''.

SEC. 6105. IMPOSITION OF COINSURANCE ON LABORATORY SERVICES.

    (a) In General.--Paragraphs (1)(D) and (2)(D) of section 1833(a) of 
the Social Security Act (42 U.S.C. 1395l(a)) are each amended--
            (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, 1996.
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