[Congressional Bills 104th Congress]
[From the U.S. Government Publishing Office]
[S. 1238 Introduced in Senate (IS)]

  1st Session
                                S. 1238

  To amend title XVIII of the Social Security Act to provide greater 
           flexibility and choice under the medicare program.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

           September 13 (legislative day, September 5), 1995

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

_______________________________________________________________________

                                 A BILL


 
  To amend title XVIII of the Social Security Act to provide greater 
           flexibility and choice under the medicare program.
    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Medicare Improvement and Choice Care 
Provision Act''.

SEC. 2. PURPOSES.

    The purposes of this Act are to--
            (1) improve the quality of medical care provided to 
        America's senior citizens, by making the medicare program more 
        responsive to the special health care needs of senior citizens;
            (2) expand and improve the existing medicare program to 
        provide senior citizens with a greater variety of health care 
        options from which to choose;
            (3) increase the flexibility of the medicare program to 
        allow health care services to be delivered in a modern fashion, 
        and to enable the program to take swift advantage of future 
        market improvements in the means of health care delivery;
            (4) provide senior citizens with the information they need 
        to make for themselves the best health care choices possible; 
        and
            (5) help preserve the immediate and long-term solvency of 
        the medicare program by beginning to alter medicare's basic 
        delivery structure by encouraging the provision of quality 
        medical care at reasonable prices through enhanced competition.

                      TITLE I--CHOICE CARE PROGRAM

SEC. 101. CHOICE CARE PROGRAM.

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

                     ``PART D--CHOICE CARE PROGRAM

``SEC. 1895A. ESTABLISHMENT OF CHOICE CARE PROGRAM.

    ``The Secretary shall establish the choice care program in 
accordance with this part.

``SEC. 1895B. DEFINITIONS.

    ``For purposes of this part:
            ``(1) Choice care plan.--The term `choice care plan' means 
        any of the following plans of health insurance:
                    ``(A) Indemnity or fee-for-service plans.--Private 
                indemnity plans that reimburse hospitals, physicians, 
                and other providers on the basis of a privately 
                arranged fee schedule.
                    ``(B) Coordinated care plans.--Private managed or 
                coordinated care plans, including--
                            ``(i) eligible organizations with risk 
                        contracts under section 1876 or competitive 
                        medical plans having contracts under section 
                        1833;
                            ``(ii) qualified health maintenance 
                        organizations as defined in section 1310(d) of 
                        the Public Health Service Act; and
                            ``(iii) preferred provider organization 
                        plans, point of service plans, or other 
                        coordinated care plans.
                    ``(C) High deductible plans in connection with 
                medicare medical savings accounts.--Private plans that 
                require the eligible individual to pay a minimum annual 
                deductible for insured medical expenses equal to at 
                least $1,500 in a calendar year and that are operated 
                in connection with medicare medical savings accounts 
                established under section 7705 of the Internal Revenue 
                Code of 1986.
                    ``(D) Other health care plans.--Any other private 
                plan for the delivery of health care items and services 
                that is not described in subparagraph (A), (B), or (C).
            ``(2) Eligible individual.--
                    ``(A) In general.--The term `eligible individual' 
                means an individual who is entitled to benefits under 
                part A and enrolled under part B.
                    ``(B) Phase-in of disabled individuals and 
                individuals with esrd.--For purposes of subparagraph 
                (A), the term `eligible individual' shall not include 
                an individual who is entitled to benefits under part A 
                under section 226(b) or 226A until such time as the 
                Secretary issues regulations in accordance with section 
                1897H.
            ``(3) Qualified provider.--The term `qualified provider' 
        means a provider that--
                    ``(A) qualifies for any or all payments under 
                subsection (d)(5)(B), (d)(5)(F), or (h) of section 
                1886; and
                    ``(B) provides inpatient services as a choice care 
                plan, or under a contract with a choice care plan, to 
                individuals enrolled with a choice care plan under this 
                part.
            ``(4) Traditional medicare program.--The term `traditional 
        medicare program' means the program of benefits available to 
        individuals entitled to benefits under part A and enrolled 
        under part B of this title, other than enrollment in an 
        eligible organization with a contract under section 1876, a 
        competitive medical plan having a contract under section 1833, 
        or a choice care plan under this part.
            ``(5) Trustees.--The term `Trustees' means the Trustees of 
        the Federal Hospital Insurance Trust Fund and the Federal 
        Supplementary Medical Insurance Trust Fund.
      ``Subpart 1--Individual Participation in Choice Care Program

``SEC. 1896A. GENERAL ELIGIBILITY.

    ``(a) In General.--
            ``(1) Eligibility to enroll.--Each eligible individual 
        shall be eligible to enroll under this part with any choice 
        care plan with a contract under this part which services the 
        reimbursement area in which the individual resides.
            ``(2) Sole payments.--An eligible individual who is 
        enrolled with a choice care plan under this part shall not be 
        eligible for any benefits under this title other than the 
        payment of the choice care value amount (described in section 
        1897C) and the rebate amount (described in section 1897F(c)) in 
        accordance with this part.
    ``(b) Enrollment Process and Deadlines.--
            ``(1) By mail.--Each eligible individual may enroll or 
        disenroll in a choice care plan with a contract under this part 
        by submitting a signed election and enrollment form (to be 
        developed by the Secretary) that is postmarked prior to the 
        close of any open enrollment period applicable to such 
        individual.
            ``(2) By telephone or through plan notification.--The 
        Secretary, in consultation with the Trustees, shall develop a 
        process by which, during enrollment periods--
                    ``(A) an eligible individual may enroll or 
                disenroll in a choice care plan under this part by 
                telephone; and
                    ``(B) a choice care plan with a contract under this 
                part may directly accept enrollment and disenrollment 
                information by an eligible individual and provide the 
                Secretary with notice of such enrollment or 
                disenrollment.
            ``(3) Use of agents.--The Secretary, in consultation with 
        the Trustees, shall implement the enrollment process in a 
        manner that ensures that eligible individuals may utilize the 
        services of, and enroll in the selected choice care plan 
        through, independent insurance agents. Any plan salesperson or 
        agent, whether independent or employed by a plan, that meets 
        personally and directly with one or more eligible individuals 
        to assist in their choice and enrollment in a plan, shall be 
        required to be accredited and licensed in the State in which 
        they operate.
    ``(c) Default Enrollment.--If an eligible individual is enrolled in 
a choice care plan under this part and such individual fails to provide 
the Secretary with notice of the individual's enrollment or 
disenrollment under subsection (b) during any open enrollment period 
applicable to the individual, the individual shall be deemed to have 
reenrolled in the plan.
    ``(d) Enrollment by an Individual.--
            ``(1) Annual 45-day period.--Each choice care plan with a 
        contract under this section shall offer an annual open 
        enrollment period between November 1 and December 15 of each 
        year for the enrollment and termination of enrollment of 
        individuals.
            ``(2) Additional periods.--Each choice care plan with a 
        contract under this section shall offer the following:
                    ``(A) Initial medicare eligibility.--An open 
                enrollment period to each eligible individual during 
                any enrollment period specified by section 1837 that 
                applies to that individual (effective as specified by 
                section 1838).
                    ``(B) Nonenrolled individuals.--A continuous open 
                enrollment period to each eligible individual who is 
                not enrolled in a choice care plan.
            ``(3) Period of enrollment.--
                    ``(A) In general.--An individual enrolling in a 
                plan during any open enrollment period under paragraph 
                (1) shall be enrolled in the plan for the calendar year 
                following the open enrollment period.
                    ``(B) Special enrollment periods.--An individual 
                enrolling in a plan during any open enrollment period 
                under paragraph (2) shall be enrolled in the plan for 
                the portion of the calendar year on and after the date 
                on which the enrollment becomes effective.
                    ``(C) High deductible plans.--An individual 
                enrolling during any open enrollment period in a choice 
                care plan which is a high deductible plan health plan 
                described in section 1895B(1)(C), shall be enrolled 
                until the close of the calendar year following the 
                calendar year referred to in subparagraph (A) or (B).
            ``(4) Terminations.--
                    ``(A) Lock-in.--Except as otherwise provided in 
                this paragraph, an individual may not terminate 
                enrollment in a choice care plan before the next open 
                enrollment period applicable to the individual.
                    ``(B) High deductible plans.--In the case of an 
                individual enrolled in a plan described in paragraph 
                (3)(C), an individual may not terminate enrollment 
                until the open enrollment period applicable to the 
                individual in the calendar year in which the enrollment 
                would otherwise terminate under paragraph (3)(C).
                    ``(C) Termination for cause.--Notwithstanding 
                subparagraph (A) or (B), an individual may terminate 
                enrollment in a choice care plan if--
                            ``(i) the individual moves to a new 
                        reimbursement area; or
                            ``(ii) the choice care plan in which the 
                        individual is enrolled fails to meet the plan's 
                        service or capacity requirements under section 
                        1897B(a)(7), as determined by the Secretary.
                    ``(D) 4-year phase-in of lock-in.--Notwithstanding 
                subparagraph (A) or (B), an individual may terminate 
                enrollment in a choice care plan prior to the next open 
                enrollment period applicable to the individual if 
                during the 1-year period beginning on--
                            ``(i) January 1, 1997, such individual has 
                        been enrolled in such plan for 3 months;
                            ``(ii) January 1, 1998, such individual has 
                        been enrolled in such plan for 6 months; and
                            ``(iii) January 1, 1999, such individual 
                        has been enrolled in such plan for 9 months.

             ``Subpart 2--Contracting and Choice Care Plans

``SEC. 1897A. AUTHORITY TO CONTRACT.

    ``The Secretary shall enter into a 1-year contract with each choice 
care plan in a reimbursement area if the plan meets the requirements of 
this section with respect to eligible individuals enrolled under this 
section.

``SEC. 1897B. CHOICE CARE PLAN REQUIREMENTS.

    ``(a) General Requirements.--Each choice care plan with a contract 
under this part shall meet the following requirements:
            ``(1) Nondiscrimination.--
                    ``(A) Enrollment.--The plan shall accept on a 
                first-come-first-served basis, up to the limits of its 
                capacity (as determined by the Secretary) and without 
                restrictions, all eligible individuals within the 
                plan's reimbursement area who elect to enroll in such 
                plan, unless to do so would result in the enrollment of 
                enrollees who are substantially nonrepresentative, as 
                determined in accordance with regulations of the 
                Secretary, of the population in the reimbursement area 
                served by the organization. The plan shall not refuse 
                or cancel coverage of eligible individuals except for 
                reasons of beneficiary fraud or nonpayment of amounts 
                due the plan under the coverage policy.
                    ``(B) Continued enrollment protected.--The plan 
                shall provide assurances to the Secretary that it will 
                not expel, or refuse to re-enroll any eligible 
                individual because of the individual's health status or 
                requirements for health care services, and that it will 
                notify each such individual of such fact at the time of 
                the individual's enrollment.
            ``(2) Parts a and b services.--The plan shall provide those 
        services covered under parts A and B of this title through 
        providers and other persons that meet the applicable 
        requirements of this title and part A of title XI. The 
        Secretary may not require any additional benefits to be 
        provided other than those described in the previous sentence.
            ``(3) Establishment of schedules.--Each choice care plan 
        shall establish premium, deductible, and copayment schedules 
        for the plan, except that in the case of plans other than high 
        deductible health plans described in section 1895B(1)(C), such 
        deductible and copayment schedules for services described in 
        paragraph (2) may not exceed the levels of deductibles and 
        copayments established for such services under the traditional 
        medicare program.
            ``(4) Out-of-area coverage.--The plan shall provide for 
        coverage for its enrollees if an enrollee requires medical care 
        out of the plan's service area.
            ``(5) At-risk basis.--The plan shall agree to provide all 
        coverage described in paragraph (2) to eligible individuals who 
        enroll with the plan for not more than the sum of the choice 
        care value amount determined with respect to such individual 
        and any additional premiums paid by such individual (pursuant 
        to section 1897F(a)), and to assume the full financial risk of 
        the cost of furnishing such coverage on a prospective basis 
        regardless of whether such cost exceeds such fixed payment, 
        except that the plan may--
                    ``(A) insure itself against such financial risk; 
                and
                    ``(B) make arrangements with other health care 
                providers to assume all or part of such financial risk.
            ``(6) Solvency.--The plan shall make adequate provision 
        against the risk of insolvency, including provisions to prevent 
        the plan's enrollees from being held liable to any person or 
        entity for the plan's debts in the event of the plan's 
        insolvency.
            ``(7) Adequate capacity.--The plan shall adequately assure 
        the Secretary that, with respect to each reimbursement area in 
        which it desires to participate, the plan has the capacity to 
        serve the expected enrollment in such reimbursement area.
            ``(8) Grievance process.--The plan shall establish an 
        internal procedure for hearing and resolving grievances between 
        the plan and enrollees, including procedures under which an 
        enrollee (or provider on behalf of such enrollee) may challenge 
        the plan's denial of coverage of or payment for medical 
        assistance or services to the enrollee.
            ``(9) Rate table.--The plan shall submit to the Secretary a 
        table of its rates for all actuarial categories of eligible 
        individuals prior to contract approval by the Secretary.
    ``(b) Plan Participation Options.--Each choice care plan with a 
contract under this part--
            ``(1) may, subject to paragraphs (2) and (3) of subsection 
        (a), offer any combination or structure of benefits, covered 
        items, services, and coverage limits;
            ``(2) may provide such members with additional health care 
        services, including prescription drugs; and
            ``(3) may require approval for the provision of 
        nonemergency medical assistance or services to an enrollee for 
        nonemergency services before such assistance is provided, 
        provided such prior approval is given in a reasonably timely 
        manner.

``SEC. 1897C. CHOICE CARE VALUE AMOUNTS.

    ``(a) In General.--The Secretary shall annually determine, and 
shall announce (in a manner intended to provide notice to interested 
parties) not later than September 7 of 1996 and each calendar year 
thereafter, the choice care value amount determined in accordance with 
this section for the following calendar year for each class of eligible 
individuals in a reimbursement area enrolled under this part with a 
choice care plan.
    ``(b) Definition of Appropriate Classes.--The Secretary shall 
define classes of individuals under this section in the same manner as 
the Secretary defines classes of individuals under section 1876.
    ``(c) Calculation of Choice Care Value Amount.--
            ``(1) 1996.--For purposes of subsection (a), the choice 
        care value amount for 1996 shall be--
                    ``(A) for a reimbursement area described in 
                subsection (d)(1), an amount equal to the average of 
                the sum of the adjusted average per capita costs 
                determined for parts A and B of all reimbursement areas 
                described in subsection (d)(1) in the State in which 
                the area is located; and
                    ``(B) for a reimbursement area described in 
                paragraph (2) or (3) of subsection (d), the average of 
                the sum of the adjusted average per capita costs 
                determined for parts A and part B of all of the 
                counties within such reimbursement area.
            ``(2) Subsequent year amounts.--For purposes of subsection 
        (a), the choice care value amount for a reimbursement area for 
        years after 1996 shall be an amount equal to the choice care 
        value amount determined for the preceding year, increased--
                    ``(A) by 11 percent if, during the preceding year, 
                the choice care value amounts determined for such 
                reimbursement area were equal to or less than 85 
                percent of the average of all choice care value amounts 
                in all reimbursement areas for such preceding year;
                    ``(B) by 7.5 percent if, during the preceding year, 
                the choice care value amounts determined for such 
                reimbursement area were equal to or greater than 85 
                percent of the average of all choice care value amounts 
                in all reimbursement areas, but equal to or less than 
                95 percent of such average for such preceding year;
                    ``(C) by 2.5 percent if, during the preceding year, 
                the choice care value amounts determined for such 
                reimbursement area were equal to or greater than 105 
                percent of the average of all choice care value amounts 
                in all reimbursement areas for such preceding year, but 
                equal to or less than 120 percent of such average;
                    ``(D) by 0.5 percent if, during the preceding year, 
                the choice care value amounts determined for such 
                reimbursement area were equal to or greater than 120 
                percent of the average of all choice care value amounts 
                in all reimbursement areas for such preceding year; and
                    ``(E) in all reimbursement areas not described in 
                subparagraph (A), (B), (C), and (D), by a percentage 
                determined by the Secretary which is greater than 2.5 
                percent and less than 7.5 percent and which ensures 
                that the average amount of the increase for all such 
                areas is 5 percent.
            ``(3) Adjusted average per capita cost.--For purposes of 
        this subsection--
                    ``(A) In general.--the term `adjusted average per 
                capita cost' has the meaning given such term by section 
                1876(a)(4).
                    ``(B) Reduction for ime, dme, and dsh payments.--
                The following shall not be taken into account in 
                computing the adjusted average per capita cost under 
                subparagraph (A):
                            ``(i) Ime.--Any payments attributable to 
                        section 1886(d)(5)(B) relating to indirect 
                        medical education.
                            ``(ii) Direct gme.--Any payments 
                        attributable to section 1886(h) relating to 
                        direct graduate medical education.
                            ``(iii) Disproportionate share hospitals.--
                        Any payments attributable to section 
                        1886(d)(5)(F) relating to direct graduate 
                        medical education.
            ``(4) Distribution of ime, dme, and dish.--
                    ``(A) In general.--
                            ``(i) Annual determination.--The Secretary 
                        shall estimate, based on enrollment in choice 
                        care plans under this part, the aggregate 
                        amount of payments that would have been made 
                        under this title to providers for each category 
                        of payment described in clause (i), (ii), and 
                        (iii) of paragraph (3)(B) with respect to 
                        individuals enrolled in choice care plans if 
                        such individuals had not been enrolled in such 
                        plans.
                            ``(ii) Allocation of amounts.--For each 
                        year, the Secretary shall allocate each of the 
                        aggregate amounts determined under clause (i) 
                        to qualified providers on a per patient basis 
                        in accordance with subparagraph (B) and based 
                        on the Secretary's best estimation of whether 
                        such amount will fully deplete each such 
                        aggregate amount for the year.
                            ``(iii) End of year reconciliation.--The 
                        Secretary shall develop a process that permits 
                        the Secretary to--
                                    ``(I) recoup from qualified 
                                providers an amount equal to the 
                                difference (if any) between the 
                                allocations made under clause (ii) for 
                                a category of payment described in 
                                clause (i), (ii), or (iii) of paragraph 
                                (3)(B) and the Secretary's estimate for 
                                such category under clause (i); and
                                    ``(II) provide additional payments 
                                to qualified providers if the 
                                allocations made under clause (ii) for 
                                a category of payments described in 
                                clause (i), (ii), or (iii) of paragraph 
                                (3)(B) are less than the Secretary 's 
                                estimate for such category under clause 
                                (i).
                    ``(B) Distribution.--The amounts that are excluded 
                from the adjusted average per capita cost in accordance 
                with paragraph (3)(B) shall be distributed to qualified 
                providers as follows:
                            ``(i) For any provider that would qualify 
                        for the indirect medical education adjustment 
                        under section 1886(d)(5)(B) or the 
                        disproportionate share adjustment under section 
                        1886(d)(5)(F), payment shall be made on a per 
                        discharge basis for each individual enrolled in 
                        a choice care plan with a contract under this 
                        part who receives inpatient care at that 
                        provider as though the traditional medicare 
                        program was making payment to such provider on 
                        the basis of a diagnostic related group.
                            ``(ii) For any provider that would qualify 
                        for the direct graduate medical education 
                        payment under section 1886(h), payment shall be 
                        made to such provider by counting as medicare 
                        inpatient days those days attributable to 
                        individuals enrolled in a choice care contract 
                        in determining the provider's medicare patient 
                        load.
    ``(d) Reimbursement Area.--For purposes of this part, a 
reimbursement area is--
            ``(1) for a county that does not fall within a Metropolitan 
        Statistical Area, the county,
            ``(2) for a county that falls within a Primary Metropolitan 
        Statistical Area, the Primary Metropolitan Statistical Area, 
        and
            ``(3) for a county that falls within a Metropolitan 
        Statistical Area but not within a Primary Metropolitan 
        Statistical Area, the Metropolitan Statistical Area.
    ``(e) Reports by Propac.--Not later then January 1, 1997, the 
Prospective Payment Assessment Commission shall submit reports to the 
Congress on the impact of the indirect medical education adjustment, 
direct graduate medical education payment, and the disproportionate 
share hospital adjustment distribution system established under 
subsection (c), and on the impact of the reimbursement areas 
established under subsection (d). Each report shall include any 
recommendations for appropriate modifications.

``SEC. 1897D. PLAN NOTIFICATION TO THE SECRETARY.

    ``(a) Notification.--
            ``(1) General notification.--Each choice care plan that 
        desires to enter into a contract under this part with the 
        Secretary in 1 or more reimbursement areas for the next 
        calendar year shall submit a notification in accordance with 
        subsection (b) to the Secretary not later than 21 days after 
        the date of the announcement of the choice care value amounts 
        described in section 1897C(a).
            ``(2) Late notification.--A choice care plan may submit a 
        notification for a calendar year in accordance with subsection 
        (b) to the Secretary after the date described in paragraph (1) 
        but such plan shall not be eligible to enroll an eligible 
        individual during the annual open enrollment period described 
        in section 1896A(d)(1)(A) for such calendar year unless the 
        Secretary determines it is otherwise fair and administratively 
        feasible.
    ``(b) Plan Notification Described.--A plan notification described 
in this subsection shall be in a form and manner prescribed by the 
Secretary and shall include the following information with respect to 
each reimbursement area that the plan seeks to serve:
            ``(1) The type of health care plan, by category described 
        in section 1895B(1).
            ``(2) A schedule of benefits and services that will be 
        available (including those subject to prior authorization by 
        the plan as a condition of coverage), including the amounts of 
        premiums, copayments, and deductibles to be assessed.
            ``(3) The identity, locations, qualifications, and 
        availability of the health care providers participating in the 
        plan.
            ``(4) The appeals procedures provided by the plan in 
        accordance with section 1897I(b).
            ``(5) The rights and responsibilities of enrollees under 
        the plan.
            ``(6) The results of the plan's independent reviews or 
        accreditation process (as described in section 1897G(d)).
            ``(7) Historical performance and satisfaction information 
        (described in section 1897G(c)); and
            ``(8) Historical enrollment and disenrollment data of the 
        plan (excluding disenrollment by death).
    ``(c) Secretary Transmission of Information to Trustees.--Upon 
receipt of the notifications described in subsection (b), the Secretary 
shall promptly transmit the information contained in such notifications 
to the Trustees. The Secretary shall also provide any other information 
requested by the Trustees, in order for the Trustees to carry out their 
duties under section 1897E.

``SEC. 1897E. INFORMATION DUTIES OF THE TRUSTEES AND PLANS.

    ``(a) In General.--
            ``(1) Open season notification.--
                    ``(A) By October 15 of each year beginning after 
                1995, the Trustees shall mail a notice of eligibility 
                to participate in the choice care program to each 
                eligible individual and each individual who is eligible 
                to become entitled to benefits under part A prior to 
                the end of the annual open season enrollment period 
                described in section 1896A(d)(1).
                    ``(B) The notice described in subparagraph (A) 
                shall include an informational brochure that includes 
                the information described this section, and any other 
                information that the Trustees determine will facilitate 
                the individual's enrollment decisions under the choice 
                care program.
            ``(2) Notification to newly medicare-eligible 
        individuals.--With respect to an individual who becomes an 
        eligible individual after the close of the annual open 
        enrollment period described in section 1896A(d)(1), the 
        Trustees shall, not later than 3 months before the date on 
        which the individual becomes an eligible individual, mail to 
        each such individual the notice of eligibility described in 
        paragraph (1).
    ``(b) Trustees' Materials; Contents.--The notice and informational 
materials mailed by the Trustees under subsection (a)(1)(A) shall be 
written and formatted in the most easily understandable manner 
possible, and shall include, at a minimum, the following information 
with respect to coverage under this part during the next calendar year:
            ``(1) The part B (and part A, if applicable) premium rates 
        that will be charged for coverage under the traditional 
        medicare program.
            ``(2) The deductible and copayment amounts for coverage 
        under the traditional medicare program.
            ``(3) A description of any changes in coverage that will 
        occur under the traditional medicare program.
            ``(4) A description of the eligible individual's 
        reimbursement area, and the choice care value amount available 
        with respect to such individual within the reimbursement area.
            ``(5) Information on the choice care plans with a contract 
        under this part in the eligible individual's reimbursement 
        area, including the premiums that will be charged by such 
        plans.
            ``(6) For each choice care plan with a contract under this 
        part in the eligible individual's reimbursement area, 
        information on the amount of cash rebates that may be received 
        by such eligible individual, or additional premium amounts, 
        deductibles or copayments that must be paid by such eligible 
        individual.
            ``(7) For each participating plan, any restrictions on 
        coverage for services furnished other than through the plan, 
        any restrictions on services furnished through the plan, such 
        as preauthorization review, concurrent review, post-service 
        review, or post-payment review, and any financial incentives 
        that might limit treatment or restrict referrals, such as 
        economic profiling or capitation.
            ``(8) Information on enrollee satisfaction with each 
        participating plan in the eligible individual's reimbursement 
        area, including enrollment and disenrollment rates from 
        previous years (excluding disenrollment by death).
            ``(9) Performance and outcome-based information and 
        reports, with respect to each of the plans with a contract 
        under this part in the eligible individual's reimbursement 
        area.
            ``(10) A simplified chart that presents and compares the 
        benefits provided and services covered of each plan 
        participating in the eligible individual's reimbursement area.
            ``(11) Any other information that choice care plans provide 
        to the Secretary under section 1897D or otherwise, that the 
        Trustees determine will be of assistance to informed 
        decisionmaking by eligible individuals.
            ``(12) The phone numbers that an eligible individual may 
        use to enroll in a choice care plan with a contract under this 
        part in the eligible individual's reimbursement area.
            ``(13) A separate notice which--
                    ``(A) identifies expenses that are generally 
                considered long-term care expenses,
                    ``(B) clearly explains to eligible individuals that 
                long-term care expenses are not covered by the 
                traditional medicare program or choice care plans, and
                    ``(C) provides a list of long-term care insurers 
                which have notified the Trustees of their availability 
                within a particular reimbursement area.
    ``(c) Use of Private Entities.--The Trustees may contract with 
private entities to undertake, in whole or in part, the informational 
duties described in this section.
    ``(d) Plan Participation in Enrollment Process.--
            ``(1) In general.--In addition to any informational 
        materials distributed by the Trustees under subsection (a), a 
        choice care plan with a contract under this part may develop 
        and distribute marketing materials and engage in marketing 
        strategies in accordance with this subsection.
            ``(2) Plan marketing and advertising standards.--Any 
        marketing material developed or distributed by a choice care 
        plan with a contract under this part and any marketing strategy 
        developed by such plan--
                    ``(A) shall compare--
                            ``(i) health care coverage available under 
                        the plan with the health care coverage 
                        available under the traditional medicare 
                        program, and
                            ``(ii) any rebates that may be available, 
                        or additional premium, deductibles, or 
                        copayments that may be required under the plan 
                        with the deductibles and copayments required 
                        under the traditional medicare program,
                    ``(B) shall be provided in a form and manner that 
                is easily understood by a typical eligible individual, 
                and that contains accurate and sufficient information 
                for an individual to make an informed decision on 
                whether to enroll in the plan, or to seek additional 
                information,
                    ``(C) shall include a telephone number that may be 
                called to receive information equivalent to the 
                information provided by the plan to the Trustees under 
                section 1897D,
                    ``(D) shall be pursued in a manner not intended to 
                violate the anti-discrimination requirement of section 
                1897B(a)(1), and
                    ``(E) shall not contain false or materially 
                misleading information, and shall conform to any other 
                fair marketing and advertising standards and 
                requirements applicable to such plans under law.
    ``(e) Plan Notification to Enrollees.--Each choice care plan with a 
contract under this part shall provide to each individual who has 
elected to enroll in the plan, at the time of enrollment and at least 
annually thereafter, an explanation of the enrollee's rights under the 
plan and this part, including an explanation of the following:
            ``(1) The enrollee's rights to benefits from the plan.
            ``(2) The restrictions on coverage for services furnished 
        other than through the plan.
            ``(3) Out-of-area coverage provided by the plan.
            ``(4) The plan's coverage of urgently needed care and 
        emergency services.
            ``(5) The appeal rights of enrollees in the plan.

``SEC. 1897F. PREMIUMS, PLAN PAYMENTS, AND CASH-BACK AWARDS.

    ``(a) Additional Premiums Paid to the Plan.--An eligible individual 
who enrolls in a choice care plan with a contract under this part shall 
pay any premium amounts that may be required by the plan in excess of 
the choice care value amount determined with respect to such individual 
directly to the plan in a manner mutually arranged between the 
individual and the plan.
    ``(b) Payments to Plans.--
            ``(1) Monthly payments in advance.--For each eligible 
        individual enrolled with the plan under this part, the 
        Secretary shall make monthly payments in advance to a choice 
        care plan with a contract under this part in an amount equal to 
        the lesser of the monthly choice care value amount determined 
        with respect to such individual under section 1897C or the 
        monthly premium determined for such individual.
            ``(2) Retroactive adjustments.--The amount of payment under 
        this paragraph may be retroactively adjusted to take into 
        account any difference between the actual number of individuals 
        enrolled in the plan under this section and the number of such 
        individuals estimated to be so enrolled in determining the 
        amount of the advance payment.
            ``(3) Trust fund withdrawals.--The payment to a choice care 
        plan under this section for eligible individuals enrolled under 
        this part with the organization and entitled to benefits under 
        part A and enrolled under part B shall be made from the Federal 
        Hospital Insurance Trust Fund and the Federal Supplementary 
        Medical Insurance Trust Fund. The portion of the payment to the 
        plan for a month to be paid by each trust fund shall be 
        determined each year by the Secretary based on the relative 
        weight that benefits from each fund contribute to the 
        determination of the choice care value amount determined under 
        section 1897C, as estimated by the Secretary.
    ``(c) Rebates.--
            ``(1) In general.--If the weighted average of the choice 
        care value amounts with respect to all individuals in a 
        reimbursement area exceeds the premium of the plan in which an 
        eligible individual is enrolled, the Secretary shall--
                    ``(A) pay to such individual an amount equal to 75 
                percent of the excess, and
                    ``(B) deposit the remainder of the excess in the 
                Federal Hospital Insurance Trust Fund.
            ``(2) Eligibility and time for payment.--
                    ``(A) Eligibility.--An individual shall be eligible 
                for a payment under paragraph (1) only if the 
                individual enrolls in the plan during the annual open 
                enrollment period described in section 1896A(d)(1).
                    ``(B) Time for payment.--A rebate under paragraph 
                (1) shall be paid as of the close of the calendar year 
                to which the enrollment applied.
                    ``(C) Special rule for high deductible plans.--In 
                the case of an individual in a choice care plan which 
                is a high deductible health plan described in section 
                1895B(1)(C)--
                            ``(i) subparagraph (B) shall not apply, and
                            ``(ii) the Secretary shall, within 30 days 
                        of enrollment of the individual in the plan, 
                        deposit the rebate into the medicare medical 
                        savings account (as defined in section 7705 of 
                        the Internal Revenue Code of 1986) of the 
                        individual specified in the enrollment.
                    ``(D) Disenrollment.--
                            ``(i) In general.--No rebate shall be paid 
                        under paragraph (1) if an individual terminates 
                        enrollment in the choice care plan before the 
                        close of the calendar year to which the 
                        enrollment applied.
                            ``(ii) Terminations for cause.--Clause (i) 
                        and subparagraph (A) shall not apply in the 
                        case of a termination described in section 
                        1896A(d)(4)(C), but the Secretary shall adjust 
                        the amount of the rebate for the terminated 
                        plan and any other choice care plan the 
                        individual enrolls in for the remainder of the 
                        calendar year.
                            ``(iii) High deductible plans.--If clause 
                        (i) applies to a plan described in subparagraph 
                        (C), the Secretary shall provide for the 
                        repayment of any amount paid under subparagraph 
                        (C).
            ``(3) Source of rebates.--The payment amount described in 
        paragraph (1) shall be made in the same manner as payments are 
        made under subsection (b)(3).

``SEC. 1897G. QUALITY ASSURANCE, PLAN COVERAGE, AND PARTICIPATION 
              STANDARDS.

    ``(a) In General.--Each choice care plan with a contract under this 
part shall--
            ``(1) have an ongoing quality assurance system or program 
        with respect to services the plan provides to eligible 
        individuals under this part which ensures that the plan meets, 
        at a minimum, the requirements of this section; and
            ``(2) be required to have received independent 
        accreditation, as described in this section.
    ``(b) Internal Quality Assurance.--
            ``(1) Access.--Each choice care plan with a contract under 
        this part shall provide or arrange for the provision of all 
        medically necessary health care services required under this 
        Act and under a contract under this part.
            ``(2) Timely delivery of services.--Each choice care plan 
        with a contract under this part shall deliver, upon request, to 
        eligible individuals enrolled with the plan upon request health 
        care services in a manner that is reasonably prompt and, when 
        medically necessary, that is available and accessible 24 hours 
        a day and 7 days a week.
    ``(c) Performance Measures.--Each plan shall undertake to measure 
and maintain data on the plan's actual performance in delivering of 
health care services to eligible individuals. Such measures shall 
incorporate the following information:
            ``(1) Patient encounter data.--Sufficient patient encounter 
        data, including data to identify the health care provider that 
        delivers services to each patient and the type of service 
        provided, as determined by the Secretary or Trustees to be of 
        assistance in the performance of their duties under this part.
            ``(2) Performance-based information.--Data that are 
        continuously or periodically gathered, and that--
                    ``(A) are sufficient to reflect the care provided 
                for the prevalent clinical conditions among the 
                enrollees served, including data on health or 
                functional status, clinical performance, functional 
                improvement, and prevention or early detection, and
                    ``(B) provide information on compliance with 
                performance-based standards that reflect a minimum set 
                of comparable performance-based data, that are selected 
                in consultation with an advisory body of outside 
                experts in order to develop a standardized set of 
                measures that can produce comparable and consistent 
                information, and that are updated periodically.
            ``(3) Plan satisfaction data.--Data that are periodically 
        gathered to measure the perception of patients, providers, and 
        purchasers, including data on the level of satisfaction 
        associated with, at a minimum, the responsiveness, access to 
        services, quality of services, and continuity of care of a 
        particular plan.
    ``(d) Independent Accreditation.--
            ``(1) In general.--Each plan shall arrange for an annual 
        external independent accreditation of the plan, which includes 
        a review of the plan's quality assurance and improvement 
        systems.
            ``(2) Accrediting organization.--The independent review and 
        accreditation shall be performed by an accrediting organization 
        that--
                    ``(A) is a private, nonprofit organization,
                    ``(B) maintains an accreditation program for 
                accrediting managed care plans or other health care 
                plans that are offered under the choice care program, 
                and
                    ``(C) is independent of the control of health care 
                providers, health care plans, or trade associations of 
                health care providers.
            ``(3) Public availability.--The results of reviews 
        described in paragraph (2) shall be made publicly available 
        upon request, and specifically made available to the plan's 
        enrollees and potential enrollees, in a manner that does not 
        disclose the identity of any particular patient.
            ``(4) Disqualification.--A choice care plan that fails to 
        receive accreditation under this subsection shall be 
        disqualified from participation in the choice care program, 
        unless the plan meets the following:
                    ``(A) Provisional accreditation.--The plan is a new 
                plan (as determined by the Secretary) and such plan is 
                making reasonable progress toward receiving 
                accreditation, to the satisfaction of the accrediting 
                organization.
                    ``(B) Prior accreditation.--The plan received prior 
                accreditation and such plan is
                 making reasonable progress toward correcting the flaws 
that led to the failure to receive accreditation, to the satisfaction 
of the accrediting organization, and such plan does in fact correct 
such flaws within 6 months.
    ``(e) Assisted Suicide.--No choice care plan may provide any 
services, the purpose of which is to cause, or to assist in the causing 
of, the death, suicide, euthanasia, or mercy killing of an individual.

``SEC. 1897H. SPECIAL RULE FOR DISABLED AND ESRD POPULATIONS.

    ``Not later then 5 years after the date of the enactment of this 
part and after the Secretary obtains appropriate experience in 
administering this part, the Secretary shall develop regulations to 
integrate individuals described in section 1895B(2)(B) in the choice 
care program established under this part.

``SEC. 1897J. DEMONSTRATION PROJECT ON MARKET-BASED REIMBURSEMENT AND 
              COMPETITIVE PRICING.

    ``After the Secretary has obtained appropriate experience in 
operating the choice care program under this part, the Secretary may 
establish 1 or more demonstration projects to determine the choice care 
value amount described in section 1897C through competitive bidding by 
choice care plans in reimbursement areas in which at least 3 choice 
care plans (including national indemnity plans) participate in the 
competitive bidding. The Secretary may conduct a demonstration project 
under this section only if the Secretary determines that the choice 
care plans desiring to participate in the competitive bidding have 
adequate aggregate capacity to service all eligible individuals in the 
reimbursement area.''

SEC. 102. MAXIMUM FLEXIBILITY IN IMPLEMENTATION.

    In promulgating regulations to implement this Act, the Secretary of 
Health and Human Services shall--
            (1) promulgate regulations to govern, and administer, the 
        choice care program established under part D of title XVIII of 
        the Social Security Act in a manner that maximizes program 
        efficiency and flexibility, and that avoids having burdensome 
        regulatory requirements or overly bureaucratic program 
        administration undermine the purposes of the choice care 
        program; and
            (2) avoid (expressly or effectively) duplicating or 
        incorporating by reference the regulations relating to section 
        1876 of the Social Security Act.

SEC. 103. CONFORMING AMENDMENTS.

    (a) In General.--Not later than 90 days after the date of the 
enactment of this Act, the Secretary of Health and Human Services shall 
submit to the appropriate committees of Congress a legislative proposal 
providing for such technical and conforming amendments in the law as 
are required by the provisions of this Act.
    (b) Medicare Patient Load.--Section 1886(h)(3)(C) (42 U.S.C. 
1395ww(h)(3)(C)) is amended by inserting ``including all days 
attributable to patients enrolled in a choice care plan under part D'' 
before the period at the end.
    (c) 1876 Contracts.--Section 1876 (42 U.S.C. 1395mm) is amended by 
adding at the end the following new subsection:
    ``(k) This section shall not apply to risk contracts for contract 
years beginning on or after January 1, 1997.''.

SEC. 104. EFFECTIVE DATE.

    The amendments made by section 101 shall apply with respect to 
contracts effective on or after 1996.
         TITLE II--TAX PROVISIONS RELATING TO CHOICE CARE PLANS

SEC. 201. MEDICARE 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. MEDICARE MEDICAL SAVINGS ACCOUNTS.

    ``(a) General Rule.--The term `medicare medical savings account' 
means a trust created or organized in the United States for the 
exclusive benefit of the account beneficiary, but only if the written 
governing instrument creating the trust meets the following 
requirements:
            ``(1) Except in the case of a rollover contribution 
        described in subsection (c)(3), the only contributions to the 
        account are--
                    ``(A) payments made by the Secretary of Health and 
                Human Services under section 1897F(c)(2) of the Social 
                Security Act on behalf of the account beneficiary, or
                    ``(B) deposits in cash to the account not in excess 
                of the amount of the rebate received for the calendar 
                year under section 1897F(c)(1).
            ``(2) The trustee is 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 such person will administer the trust 
        will be consistent with the requirements of this section.
            ``(3) The assets of the trust will not be commingled with 
        other property except in a common trust fund or common 
        investment fund.
            ``(4) No part of the trust assets will be invested in life 
        insurance contracts.
            ``(5) The interest of an individual in the balance in the 
        individual's account is nonforfeitable.
    ``(b) Tax Treatment of Accounts.--
            ``(1) Exemption from tax.--A medicare medical savings 
        account is exempt from taxation under this title unless it 
        ceases to be such an account under paragraph (2). 
        Notwithstanding the preceding sentence, a medicare medical 
        savings account is subject to the taxes imposed by section 511 
        (relating to imposition of tax on unrelated business income of 
        charitable, etc. organizations).
            ``(2) Account terminates if individual engages in 
        prohibited transaction.--
                    ``(A) In general.--If, during any taxable year of 
                the account beneficiary, such beneficiary engages in 
                any transaction prohibited by section 4975 with respect 
                to the account, the account shall cease to be a 
                medicare 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 medicare medical savings account by reason of 
                subparagraph (A) on the first day of any taxable year, 
                subsection (c) 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.
    ``(c) Tax Treatment of Distributions.--
            ``(1) Amounts used for qualified medical expenses.--Any 
        amount paid or distributed out of a medicare medical savings 
        account which is used exclusively to pay qualified medical 
        expenses of any account beneficiary shall not be includible in 
        gross income.
            ``(2) Inclusion of amounts not used for qualified medical 
        expenses.--
                    ``(A) In general.--Any amount paid or distributed 
                out of a medicare medical savings account which is not 
                used exclusively to pay the qualified medical expenses 
                of the account beneficiary shall be included in the 
                gross income of such beneficiary.
                    ``(B) Special rule.--For purposes of subparagraph 
                (A), any distribution of property shall be taken into 
                account at its fair market value on the date of the 
                distribution.
            ``(3) Rollover contribution.--
                    ``(A) In general.--If any amount paid or 
                distributed from a medicare medical savings account to 
                the account beneficiary is paid into a medicare medical 
                savings account for the benefit of such beneficiary not 
                later than the 60th day after the day on which the 
                beneficiary receives the payment or distribution--
                            ``(i) paragraph (2) shall not apply to such 
                        amount, and
                            ``(ii) such amount shall be treated as a 
                        rollover contribution described in this 
                        paragraph.
                    ``(B) Inherited accounts.--If an account 
                beneficiary dies, the medicare medical savings account 
                shall be treated in the same manner as an individual 
                retirement plan.
            ``(4) Coordination with medical expense deduction.--For 
        purposes of section 213, any payment or distribution out of a 
        medicare medical savings account for qualified medical expenses 
        shall not be treated as an expense paid for medical care.
    ``(d) Definitions.--For purposes of this section--
            ``(1) Qualified medical expenses.--
                    ``(A) In general.--The term `qualified medical 
                expenses' means any expense--
                            ``(i) for medical care (as defined in 
                        section 213(d)), or
                            ``(ii) for qualified long-term care 
                        services (including coverage under an insurance 
                        contract for payment of such services).
                    ``(B) Qualified long-term care services.--The term 
                `qualified long-term care services' means necessary 
                diagnostic, preventive, therapeutic, rehabilitative, 
                and maintenance (including personal care) services 
                which are required by an individual during any period 
                during which such individual is a functionally impaired 
                individual (as determined in the manner prescribed by 
                the Secretary).
            ``(2) Account beneficiary.--
                    ``(A) In general.--The term `account beneficiary' 
                means an individual--
                            ``(i) who is entitled to benefits under 
                        part A of title XVIII of the Social Security 
                        Act and enrolled under part B of such title, 
                        and
                            ``(ii) for whose benefit the medicare 
                        medical savings account is maintained.
                    ``(B) Joint accounts.--If married individuals are 
                both described in subparagraph (A)(i), they may 
                establish a joint account and each spouse shall be 
                treated as an account beneficiary.
    ``(e) 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 such 
        person 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 medicare 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.
    ``(f) Reports.--The trustee of a medicare medical savings account 
shall make such reports regarding such account to the Secretary and to 
the individual for whose benefit the account is maintained with respect 
to contributions, distributions, and such other matters as the 
Secretary may require under regulations. The reports required by this 
subsection shall be filed at such time and in such manner and furnished 
to such individuals at such time and in such manner as may be required 
by those regulations.
    ``(g) Transfer of Account Incident to Divorce.--The transfer of an 
individual's interest in a medicare medical savings account to an 
individual's spouse or former spouse under a divorce or separation 
instrument described in subparagraph (A) of section 71(b)(2) shall not 
be considered a taxable transfer made by such individual 
notwithstanding any other provision of this subtitle, and such interest 
at the time of the transfer shall be treated as a medicare medical 
savings account of such spouse, and not of such individual. Any such 
account or annuity shall, for purposes of this subtitle, be treated as 
maintained for the benefit of the spouse to whom the interest was 
transferred.''
    (b) Tax on Prohibited Transactions.--Section 4975 of the Internal 
Revenue Code of 1986 (relating to prohibited transactions) is amended--
            (1) by adding at the end of subsection (c) the following 
        new paragraph:
            ``(4) Special rule for medicare medical savings accounts.--
        An individual for whose benefit a medicare medical savings 
        account (within the meaning of section 7705(a)) 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 medicare savings 
        account by reason of the application of section 7705(b)(2)(A) 
        to such account.'', and
            (2) by inserting ``or a medicare medical savings account 
        described in section 7705(a)'' in subsection (e)(1) after 
        ``described in section 408(a)''.
    (c) Failure To Provide Reports on Medicare Medical Savings 
Accounts.--Section 6693 of the Internal Revenue Code of 1986 (relating 
to failure to provide reports on individual retirement accounts or 
annuities) is amended--
            (1) by inserting ``or on medicare medical savings 
        accounts'' after ``annuities'' in the heading of such section, 
        and
            (2) by adding at the end of subsection (a) the following: 
        ``The person required by section 7705(f) to file a report 
        regarding a medicare 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.''
    (d) Clerical Amendments.--
            (1) The table of sections for subchapter B of chapter 68 of 
        such Code is amended by inserting ``or on medicare medical 
        savings accounts'' after ``annuities'' in the item relating to 
        section 6693.
            (2) The table of sections for chapter 79 of such Code is 
        amended by adding at the end the following new item:

``Sec. 7705. Medicare medical savings accounts.''
SEC. 202. TAXATION OF CHOICE CARE REBATES.

    (a) In General.--Subsection (a) of section 86 of the Internal 
Revenue Code of 1986 (relating to taxation of social security and tier 
1 railroad retirement benefits) is amended by adding at the end the 
following new paragraph:
            ``(3) Medicare choice care rebates.--Gross income shall 
        include any choice care rebate amount received under section 
        1897F(c) of the Social Security Act to the extent such amount 
        is not deposited into a medicare medical savings account 
        established under section 7705.''
    (b) Effective Date.--The amendment made by this section shall apply 
to amounts received after the date of the enactment of this Act.
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